Small scale solar power plants for households and remote areas power generation

Addis Ababa University
Addis Ababa Institute of Technology
School of Civil and Environmental Engineering
Small-Scale Solar Power Plants for Households and
Remote Areas Power generation
By
----------------- ---------------
Instructor: -Bedru M. -----------
2019

AAiT School of Civil and Environmental Engineering
2
Table of contents
Executive Summary ------------------------------------------------------------------ 3
1. Introduction
a. Vision/Mission Statement and Goals ------------------------------------- 4
b. The investment opportunity ------------------------------------------------ 5
c. Business overview ----------------------------------------------------------- 5
2. Market Analysis -----------------------------------------------------------------------7
a. Market Size -------------------------------------------------------------------7
b. Why Stirling engine technologies? ----------------------------------------7
c. Energy demand projection ------------------------------------------------- 8
d. Customer Analysis ----------------------------------------------------------10
e. Competitor Analysis --------------------------------------------------------10
f. Pricing Scheme --------------------------------------------------------------11
g. Market Risk ------------------------------------------------------------------11
3. Product/Service -----------------------------------------------------------------------12
4. Operating Plan ------------------------------------------------------------------------14
a. Business Model Economics ----------------------------------------------- 14
b. Ownership and management -----------------------------------------------15
c. Resource and production ---------------------------------------------------15
d. Legal issues ------------------------------------------------------------------18
5. Financial Plan ------------------------------------------------------------------------ 19
a. Capital requirement ---------------------------------------------------------19
b. Means of financing the project --------------------------------------------21
c. Income from the project ----------------------------------------------------22
6. Feasibility Analysis ------------------------------------------------------------------23
a. Break-even analysis --------------------------------------------------------24
b. What is the return on investment (ROI)? -------------------------------25
c. Internal Rate of Return (IRR) ---------------------------------------------26
d. Justification ------------------------------------------------------------------27

3
Executive Summary
Company Overview. The company‟s Energy Solutions will empower Ethiopia‟s
underdeveloped communities through the application of solar energy technologies. The company
will become the world‟s leading provider of solar energy (SE) products and services, with
expansion projects in Asia and Latin America in the future.
Industry & Marketplace Analysis. The energy industry is a major area for investment, and
policy makers in Ethiopia and elsewhere are looking to this sector to be the driver of future
prosperity. Since, most of the power generated nowadays is produced using fossil fuels, which
emit tons of carbon dioxide and other pollutants every second, countries all around the world,
including Ethiopia, are considering different renewable energy technologies, especially solar
technologies, as an alternative power generation.
Products & Services. The company will introduce affordable electricity to individual
households by building a 1.5kW solar power plant and offering attractive financing options. In
addition, the company will provide a 15kW solar power station for a group of 10 households.
Operations and Development. The company‟s model is based on developing powers
approach for effective business execution. It will follow the three basic elements in reaching its
goals, partner with NGOs, implement projects by designing and constructing optimal systems
and sell systems to a range of potential owners.
Management Team. The company will be a sole proprietorship, headed by Moibon Nigatu. In
addition, it will consist of Financial and Human Resource Manager, Promotion and
Advertisement department, Engineering division and Technical and Technological team manager
Summary of Financials. The company will get 90% of its finances as a loan from the banks
and the rest 10% will be covered from its own equity. Based on an annual forecasted sells
volume of 1185 items for product 1 and 592 items for product 2, the company will earn a total of
106,704,000 birr before tax and a net annual profit of 25,770,491 birr. Based on the analysis
done, the company will return its total investment and loan within 8 months of operation.

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Chapter One
Introduction:
Mission, vision and value statement
Mission
The company is set up with a mission to provide customers with sufficient supply of solar energy
technologies in a very high quality and in a very cost effective manner with shipping, installation
and maintenance services.
Vision
The modern world offers huge potentials. More people are better educated than ever before and
scientific knowledge and technology offers solutions to most of the world's problems. The
responsibility of business is to ensure that there is economic activity that helps the world to
progress, and initiatives that address the subject of solar energy and energy efficiency are a
priority for this. As a result, the company‟s vision is to be the number one solar energy
technology supplier in Ethiopia and to continue and provide quality product so far as to be the
most competitive organization in the world.
Objectives
The company‟s first solar energy (SE) project will be in Addis Ababa, Ethiopia. It will then
quickly expand to other rural communities of Ethiopia. The company will aggressively expand
into a global provider of SE products and services by seeking new opportunities in other parts of
Africa, as well as in Asia and Latin America. By 2025, the company will be the world‟s
undisputed leading provider of SE products and services, and will operate Research &
Development divisions for creating innovative novel technologies that address the environmental
crises of the 21st Century. This business plan will present the company‟s strategy for getting
started, by establishing a profitable and sustainable SE business in Addis Ababa, Ethiopia.

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The Investment opportunity
The energy industry is a major area for investment, and policy makers in Ethiopia and elsewhere
are looking to this sector to be the driver of future prosperity. The basic economics of energy and
developments in technology are making the area of Solar Energy System Installation and Energy
Efficiency Retrofits increasingly attractive. Our company is positioned to grow in this segment
of the energy market. Sector studies show the vast potential of this segment of the market. Some
well-known investors including Warren Buffet have made long term investments in the sector.
Keys to Success
The key to the company‟s success will be the careful matching of competence and cost.
The project is based on:
 the availability of modern technology that enables solar systems to be economical; and
 old fashioned hard work and supervision that makes it possible for decent wages to be
paid while achieving low cost results.
Business overview
Most of the power generated nowadays is produced using fossil fuels, which emit tons of
carbon dioxide and other pollutants every second. More importantly, fossil fuels will eventually
run out. As a result, Sustainable, low carbon energy supplies are becoming one of the most
pressing challenges facing society. The need to take immediate action has been underscored by
the International Energy Agency‟s World Energy Outlook 2011 which concluded that „There are
few signs that the urgently needed change in the direction of global energy trends is underway‟
and that „We cannot afford to delay further action to tackle climate change‟. According to
estimates by the International Energy Agency, the world‟s oil reserves will decline by 40-60% in
the next twenty years.
Also, World population is expected to double by the middle of the 21st
century (Global
Energy, 1998). This will consequently result in a 3-5-fold increase in world economic output by

6
the year 2050, and a 10-15-fold increase by the year 2100. Consequently, Primary energy
requirements are expected to increase by approximately three folds by the year 2050 and five
folds by the year 2100. This is expected to exert tremendous pressure on primary energy
suppliers. Thus, Energy has an established positive correlation with economic growth. Providing
adequate, affordable and clean energy is a prerequisite for eradicating poverty and improving
productivity. The inevitable increase in the use of fossil fuels alongside a country‟s economic
growth presents associated side effects of threat to the nation‟s energy security, as well as
environmental degradation through climate change. A feasible alternative to the indiscriminate
burning of fossil fuels lies in the accelerated use of renewable energy. In tropical countries,
which have sunshine almost throughout the year in most parts, solar energy is one of the most
viable options.
It is astonishing when we realize that the earth receives more energy from the sun in just
one hour than the world population uses in a whole year. The intensity of solar radiation outside
the atmosphere is about 1,300 W/m2
. When sunlight passes through the earth's atmosphere, a
portion is scattered or absorbed by haze, particles, or clouds. On a clear day about 80% to 90%
of the solar radiation entering the atmosphere reaches the ground.
The current power generation facilities of developing countries, like Ethiopia, are not able
to meet all the energy requirements of their nation. Furthermore, the recent housing projects in
Ethiopia are booming with a maximum finishing time plan of 7 years. This and other factors will
pose an additional stress on the primary power providers. As a result, technologies such as solar
power plants can support the primary power providers in generating power in households and
remote areas which can be used for small-scale applications.

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Chapter Two
Market Assessment
Market Size
Ethiopia’s immense solar power
generation potential
Solar technologies are being promoted to
replace fuel based lighting and off-grid
electrical needs. Currently, most of the solar
technologies in place are photovoltaics.
Ethiopia is thought to have about 5 MW of
off-grid solar. Almost all current solar
power is used for telecommunications.
Other uses include village well pumps,
health care and school lighting. A current
government initiative plans to bring solar
power to 150,000 households by 2015. The first phase included 1 MW of panels. The first large
installation of solar was a village grid of 10 kW in 1985, expanded to 30 kW in 1989. A solar
panel assembly plant opened in Addis Ababa in early 2013 capable of making 20 MW of panel
per year. However, these technologies are expensive and they have efficiency issues. Thus, the
country has to find other cost effective and more efficient ways of solar technologies like the
solar-thermal power plants.

8
Why Stirling engine technologies?
Currently, solar-thermal technologies, specially dish Stirling systems, provide the highest solar-
to-electric efficiency, which is currently about 25%, and their modular nature supports
scalability.
A typical Dish Stirling system (Source: intersol.se)
Energy demand projection
The Growth and Transformation Strategic plan predicts that industry sector will grow in a 20%,
Agriculture 8% and Service 10.5% rate for the coming five years assuming an 11% GDP growth
rate. And for a 15% GDP growth rate the agriculture, industry and service sectors are expected to
grow 14.9%, 21.4% and 12.8% respectively. With the expansion of the industrial sector, which
entails expansion of heavy duty manufacturing plants, the energy demand of the sector is

9
expected to grow in an exponential rate. In a similar fashion with the expansion of mechanized
Agriculture which is currently driven by the soaring foreign direct investment on agriculture, the
energy demand by the agricultural industry is expected to grow. The same principle applies for
the service sector too. For the lack of detailed studies, analyses and data sources, let us take an
extremely conservative assumption that the energy demand will grow at the same rate as the
GDP. Then, the energy demand by 2030 will be 251 Million Tons of Oil Equivalent and the per
capita demand will reach 1,889 Kg Oil Equivalent. The two tables below show energy
consumption projections with an assumption of 11% Energy demand growth.
The above two charts show how high the Energy demand will be even with the modest
assumption that energy demand will grow at 11% rate. But it is inevitable that the energy
demand will grow in a much higher rate due to the following reasons.
1. Population Growth
2. Economic growth

10
3. Living standard growth
4. Technological growth
The cumulative effect of the above four causes and others is going to entail a dramatically high
demand of energy.
Customer Analysis
The company will target the small end-user market – residential and small commercial
customers. The bulk of its customer base will most likely be environmentally minded owners of
single-family residences willing to pay a premium for electricity generated from renewable
energy resources. In order to reach potential customers, the company will develop relationships
with other organizations that have an affinity with green power generation concepts and
products, and who are willing to become “marketing partners”, like governmental and private
environmental organizations.
Competitor Analysis
Competing Service Providers. There are a few companies in Addis Ababa that provide solar
power technologies. Some of them include,
 Solar woman/Tigist Tadese gebremariam: Import and distribution of Solar Lanterns,
panels, solar batteries, and many more solar components
 Eternum Energy Ventures: EnVent: is engaged in importing and distributing solar lamps
and solar home systems to enable rural people to read, study, work and do household
tasks while saving costs on the use of kerosene and providing better health,
environmental and education conditions.
 Ethio Resources Group (ERG): provides solar electric power systems, biomass energy
systems, biomass energy biofuel, micro hydro energy systems, renewable energy systems,
renewable energy resource assessment, energy planning and modeling.
However, these and the other companies are not involved in the design and supply of small-scale
solar power plants that can satisfy the average energy requirement of a typical household.

11
Furthermore, there is not a single organization in all of Addis Ababa that offers financing for
solar electric systems. The national utility, the Ethiopian Electric Power Corporation (EEPCO),
seems to have the intention of dedicating most of the power generated to the various power
consuming factories and industries.
Pricing Scheme
The pricing strategy of the company is based on the following important factors
 There are no other companies in Ethiopia providing small-scale solar power plants that
can satisfy the average power requirements of a household.
 The problem of power shortage in Ethiopia is at its highest.
 Most of the rural areas of Ethiopia are not electrified.
 The great need of the people and business firms for alternative power sources.
 The people‟s economic status.
These and other factors places the company in the perfect environment to set a higher price for
its products and dominate the market for longer times. The company‟s plan is to set a 65% profit
margin for its first product (1.5kW power plant) and a 50% profit margin for its second product
(15kW power plant). This sets the price for its first product to be 15,000 birr and for its second
product to be 100,000 birr. The second product is sold for a group of 10 households which makes
its price to be 10,000 per household.
Market Risk
While there are all the normal risks of business, the financial and economic risk is small. The
trends of technology should make the future of this segment of the energy sector more profitable
not less, and future higher prices for fossil based energy makes the SE project more attractive,
not less.

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Chapter Three
Products and Services:
There are two lines of products offered by the company.
1. Small-scale (1.5kW), Solar Dish Stirling power plant for individual households and
small-scale remote area power generation.
2. Large-scale (15kW) Solar Dish Stirling power plants for group of households,
condominiums and rural area power generation.
Our services include providing customers with the two different lines of products that best meet
their expectations. Other than selling the two products, we will also provide shipment and
installation services for those who want it with an agreement and fair additional cost. Besides
shipment and installation services, system maintenance and supply of spare parts with also be
include
Stirling Engine Detail

13
Specifications Product 1 (1.5kW)
(Individual household)
Product 2 (15kW)
(10 households)
Power output 1.5kW 15kW
Maximum support column height 2m 4.3
Maximum dish diameter 4m 10m
Maximum focal length 3m 5m
Number of facets or petals 12 36
Number of cylinders 1 2
Engine type Beta Beta
Compression clearance volume 31cc 310cc
Expansion clearance volume 31cc 310cc
Compression sweep volume 32cc 320cc
Expansion sweep volume 32cc 320cc
Cooler volume 15cc 150cc
Regenerator volume 50cc 500cc
Heater volume 75cc 750cc

14
Chapter Four
Operating Plan:
The company‟s model is to:
1) Partner with NGOs to develop deal flow and to identify villages for electrification,
2) Implement projects by designing and constructing optimal systems, establishing
Energy Service Companies, and installing pre-payment meters, and
3) Sell systems to a range of potential owners. This model is similar to Inter-Gen or
AES, global energy power generation firms that build large power plants in
developing countries. The main difference is that the company operates on a much
smaller scale and specializes in distributed generation solutions.
Business Model Economics
The company‟s business model is supported by two main economic value propositions, one
to the buyer of our systems and the other to the end customers of the energy. This
economic model is adopted from developing powers approach, a company working with
the design, fabrication and distribution of hybrid power plants in different rural areas of
developing countries.

15
Ownership and management
A. Ownership
The company is a sole proprietorship, headed by Moibon Nigatu. The company will consist
of
 Financial and Human Resource Manager
 Promotion and Advertisement department,
 Engineering division.
 Product designer
 Production planner
 Manufacturer
 Machine operators and maintainers
 Technical and Technological team manager
Resource and production
A. Resource
 Raw materials
Raw materials required to manufacture a solar power plant include sheet metals, RHS structural
steels, back-surfaced glass, compressed helium gas, bolts and bearings. Input raw materials are
readily available in Addis Ababa.
The company, in its first phase of production, is planning to produce a total of 6 products per
day. 4 of them are the 1.5kW systems (product 1) and the rest 2 are the high capacity 15kW

16
systems (product 2). The work schedule is based on 10 hr per day, 6 days a week, 312 days a
year rate. Annual raw material expenditure at full capacity production will be Birr 38,742,528.
The detail annual raw and auxiliary materials at full capacity production are presented in Table
below
Sr.no Product 1
(1.5 kW Dish-Stirling System)
Product 2
(15 kW Dish-Stirling System)
Description Quantity Unit cost
(Birr)
Total cost
(Birr)
Quantity Unit cost
(Birr)
Total cost
(Birr)
1 2mx1m
Sheet metal
7488 600 4,492,800 24336 600 14,601,600
2 40x40x3
RHS
2496 300 748,000 4992 300 1,497,600
3 Back-
Surfaced
glass
7488 500 3,744,000 24336 500 13,168,000
4 Compressed
Helium gas
44 200 8,800 312 200 62,400
5 M5 Bolts 19968 8 159,744 19968 8 159,744
6 Bearings 4992 10 49,920 4992 10 49,920
Grand total price 9,203,264 29,539,264
 Utilities
Electricity, water and telephone line are inputs required by the envisaged plant. A total of
100kWh of electrical power is required, working 10 hours a day for 312 days a year, the cost of

17
electrical energy at the rate of Birr 0.4086 per kWh will be Birr 127,483. Water requirement is
estimated at 600 lit/day, and at a rate of Birr- will cost Birr- and telephone line requirement
estimated is a total of 6 hours a day or 360 min per day and at a rate of birr – will cost Birr-.
Thus, the total cost of utilities per annum will be Birr-. The annual utility consumption is shown
in Table below
Sr.no Description Rate Quantity(Kwh) Cost,(Birr)
1 Electric power,(Kwh) 0.4086(Birr/Kwh) 100 127,483
2 Water,(m3
) 3.40 (Birr/m3
) 6000(lit/day) 6,120
3 Telephone (/min) 6(hfrs/day) 0.23Birr/6min 4,140
Total utility cost = 137,743
B. Production
The following components are used in production:
 Pipe and bar benders to create the paraboloid framework profile where the glass
paraboloid will rest.
 Heat press for producing the 12 parabolic mirror facets.
 Sheet metal bender for producing different structural and functional components.
 Lathe machine for producing the crankshaft inside the engine and the other rotating
cylindrical components.
 3 Axis Milling machine for producing the different precision engine components
including the connecting rods.
 Drilling machine for preparing holes for bolting and component assembly.
 Grinders for profile cutting

18
Legal issues
Date:
Address:
This agreement is legally binding contract between _______________(name 1), of
_________________________________(address), and ________________(name 2), of
________________________________(address). The contract signifies a confidentiality
agreement, and is initiated to safeguard the interest of ______________ (name 1) and his client.
Both parties agree to the following terms and conditions: Confidential information consists of -
relevant or related findings, interpretations of law, information of clients and related parties,
accounts, financial information, plans, drawings, programs, models, patents, proposed patents,
ideas, techniques, copyrights, personal information, business information, statutory or
compliance related forecast. Each party accepts that the disclosure of aforementioned items, for
any benefit, will result into legal proceedings, loss of job, and a penalty. The disclosure cannot
be made to any person, company, government organization, and media house. Such information
can be disclosed only in case of official judicial interrogation after an issue of a warrant, under
the pledge of court, and in the honorable presence of judge and people of the jury.
Each party accepts that this contract is legally binding and is signed in the interest of both
parties.
Signature: ______________________________________
______________________________________________ (name1)
Signature: ______________________________________
______________________________________________ (name 2)

19
Chapter Five
Financial Plan:
Capital requirement
Capital requirement of our company with the necessities and their detailed prices is described
and tabulated below
Machinery and Equipment
List of machinery along with equipment are presented in Table – below
Sr. No. Description Price (Birr) Qty. (No) Total
1 Bar bender 80,000 2 160,000
2 Sheet metal bender 65,000 2 130,000
3 Heat press 200,000 2 400,000
4 Lathe machine 350,000 1 350,000
5 3 Axis Milling machine 350,000 1 350,000
6 Drilling machine 35,000 3 105,000
7 Grinder 40,000 3 120,000
8 Testing equipment & tools 54,000 2 108,000
Grand Total Price 1,723,000

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Man power and Training requirement
A. Man power requirement
Lists of man power along with their monthly salary are listed in table – below
Sr. No. Description Req. No. Monthly
salary
1 General Manager 1 30,000
2 Secretary 1 4,000
3 Production & Technical Head 1 7,000
4 Finance of Administration Head 1 10,000
5 Cashier 1 3,500
6 Accountant 3 5,000
7 Clerks 2 3,500
8 Machine Operator 5 10,800
9 Assistant Machine Operators 4 6,500
10 Technicians 3 6,000
11 General Service 3 1200
Sub Total 178,100
Benefit (25%) Basic salary 44,525
Total Monthly salary 222,625
Total Annual salary 2,671,500

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B. Training requirement
Required for
1. Head and assistant technical machine operators
2. Machine technicians (for maintenance purpose)
Training program will be given by the machinery suppliers for 3-month maximum and it will be
held at our own plant.
Training will cost the plant an estimated amount of birr 65,000.
The total annual operating expenses are summarized in the table below:
Items Cost %
Raw materials 38,742,528 91.9
Utilities 137,743 0.33
Wages and salaries 2,671,500 6.34
Training programs 65,000 0.15
Advertisement costs 15,000 0.035
Furniture 256,000 0.6
Bathroom supplies 26,850 0.063
Rent 240,000 0.57
Total operating cost 42,154,621 100
Means of financing the project
 Means of finance: - the project will be funded by
90% bank loan – 5,000,000 birr
10% equity – 500,000 birr

22
Income from the project
The company would have an estimated production rate of 4 power plants per day for product 1
(1.5kW system) since it‟s the most demanded type and 2 power plants per day for product 2
(15kW systems). Considering capacity utilization and saleable products, the annual production
would, be about 1185 blocks for class product 1 and 592 for product 2 as given below.
Product
type
Production
/ hour
(PPH)
Capacity
Utilization
(CU)
Daily production
envisaged (DP)
Saleable
products
(SP)
Working
days/year
(WD)
Annual
production (AP)
Product 1 4 95% 3.8 ~ 4 95% 312 1,185.6
Product 2 2 1.9 ~ 2 592.8
Based on the estimated annual and daily production and the pricing distribution given above the
income from the project is given in the table below:
Type of Product Unit price (Birr) Annual Production Annual Income
Product 1 (1.5kW) 40,000 1,185.6 47,424,000
Product 2 (15kW) 100,000 592.8 59,280,000
Total Annual Income 106,704,000
DP PPH CU
 
AP DP SP WD
  

23
Chapter Six
Feasibility Analysis:
Capital requirement
Fixed assets
 Cost of machinery and equipment: 1,723,000 Birr
 Office equipment, Furniture and rent: 496,000 Birr
 Total capital: 2,219,000 Birr
Monthly variable Costs (MVC):
Raw Materials costs for the two line of products = 3,270,260 Birr
Monthly Fixed Costs (MFC):
Marketing and administrative cost (salary and wedges): 222,625 Birr
Production house Rent: 20,000 birr
Total fixed cost = 242,625 birr
Gross Monthly Income (GMI):
Total income generated by the sale of the two lines of products in a month.
 Number of products sold in one month (product 1): 99
 Number of products sold in one month (product 2): 50

24
Gross Monthly Expense (GME):
Gross Monthly Profit (GMP):
Net Profit after Tax:
Monthly loan interest:
Net Profit after Tax and Interest:
Break-even analysis
Total variable expenses: 3,270,260 birr
GMI: 6,485,000 birr
   
99 15,000 50 100,000
6,485,000 birr
GMI    

242,625 3,270,000
3,512,625 birr
GME MFC MVC
GME
 
 

6,485,000 3,512,625
2,972,375 birr
GMP GMI GME
GMP
 
 

 
 
– 15%
2,972,375 2,972,375 0.15
2,526,518.75 birr
GMP MONTHLY TAX

  

2,526,518.75 0.15
378,977.8 birr
 

2,526,518.75 378,977.8
2,147,540.94 birr
 


25
Total fixed costs: 242,625 birr
 The breakeven point is the point where the level of operation at which a business neither
earns a profit nor gets a loss or it also refers to the amount of rentals after which we will
pay all our fixed investment and start making profits.
What is the return on investment (ROI)?
The ROI for this project is as follows:
The implication of which is that the business returns its investment within 2 and a half months.
 
1
3,270,260
1
6,485,000
0.496
Total Variable Expense
Contribution Marigin
Net Sales Estimate GMI
 
 

242,625
0.496
489,163.3
Total Fixed Cost
Break Even Point
Contribution Marigin
birr



2,147,540.94
5,489,260
0.39
Monthly Net Profit
Retern on investment
Total Capital Requirement




26
Internal Rate of Return (IRR)
Internal rate of return for an investment is the percentage rate earned on each dollar invested for
each period it‟s invested. IRR is also another term people use for interest. Ultimately, IRR gives
an investor the means to compare alternative investments based on their yield.
The Internal Rate of Return varies depending on the type of business and investment. Therefore,
for this case if the IRR is 30% per month after the net profit, then our investment will repay its
loan plus interest in 8 months.
30% of Net Profit after tax and Interest:
Roughly the investment will repay it total loan plus interest in 8 Months.
Is the project feasible?
Based on the analysis done on this feasibility study it is evident that the business is feasible.
Justification
Profitability
Based on the projected profit and loss statement, the business will generate a profit throughout its
operation life. Annual net profit after tax assuming the 12 months of operation out of the year
will be 30,318,225 Birr.
Break-even Analysis
2,147,540.94 0.3
644,262.282
5,000,000
8
644,262.282
birr
Total Investment Loan
i.e. Months
Monthly IRR
 

 

27
The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. Therefore, the break–even point
for the business is 489,163.3 Birr. To this end, the breakeven point of the project including cost
of finance is estimated by using income statement projection.
Payback Period
The payback period, also called pay–off period is defined as the period required to recover the
original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project‟s initial investment
will be fully recovered within 8 months.
Internal Rate of Return
The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment.
Put another way, the internal rate of return for an investment is the discount rate that makes the
net present value of the investment's income stream total to zero. It is an indicator of the
efficiency or quality of an investment. A project is a good investment proposition if its IRR is
greater than the rate of return that could be earned by alternate investments or putting the money
in a bank account.
Economic Impact
In addition to supply of the domestic needs, the project will generate tax revenue for
government. The new business venture has a positive economic impact in the country‟s
economy. It helps solve the problem of shortage of electric power. The other important impact is
that of job creation and salary payment to employees. This is helpful is reducing the number of
unemployed people in the country. It also provides some income for the worker to support
him/herself and also help his/her family.

28
References
1. African Regional Implementation Review for the Commission on Sustainable
Development (CSD-14), Report on the Review of African Sustainable Industrial
Development, Nebiyeleul Gessese (PhD), UNECC and UNIDO.
2. Developing power business plan: empowering the bottom of the pyramid, Center for
sustainable systems, University of Michigan, Scott Gregory Baron
3. Business Plan for Project Karagwe, Ambeeka Energy Solutions, January 2000
4. Business Plan for Solar Energy System Installations and Energy Efficiency Retrofits,
SEER.
5. http://www.wkipedia.com

Small scale solar power plants for households and remote areas power generation

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Small scale solar power plants for households and remote areas power generation