AD, Accelerated Depreciation for Solar projects. Who can claim AD? Advantages of AD !!

Accelerated Depreciation

Accelerated depreciation is a term used to depreciate the assets in a manner that greater deductions are allowed in the first few years specially for solar projects. Where as there is no such term in the glossary, appendix or the contents. Normal depreciation is 20% on plant or machinery for any business. But in case of  solar power generation plants government of India has allowed to claim 80% depreciation in first year of the commissioning of the solar power plant generation. 

Accelerated depreciation can reduce costs during a company’s start up year. By increasing the deductions taken during the first few years of business, you will reduce your company’s overall tax debt.

Depreciation is one aspect of the tax, that facilitates greater investment in renewable energy and ultimately lower costs for consumers.

 In India, Accelerated depreciation (AD) allows investors, mostly setting up capacity for captive use, to take advantage of up to 80% of the project cost.

For Example: how AD works in a 1MW solar power generation:

• Project cost (capital cost) to be 800 crores.
• The depreciation amount to be 90% (10 % scrap value assuming)
• Book depreciation (on fixed assets) to be 5.28 % (Dep. As per companies act).
• Tax depreciation rate to be 80% (under Ad benefits)
• Effective tax rate (as per government) to be 33.99

We will take only 5 years to show AD, where as the total life of a solar power plant is taken as 25 years. (though it continues for the entire life cycle of the project). The book depreciation under the straight line method (as per companies act ) would be the same for every year. The date of commissioning of project is very important and should be taken care while calculation. In this case, it is September month. so the tax depreciation would be applicable for 6 months in the first financial year April-March. It is very evident that initially the AD would be very high with, which helps to claim the 80% depreciation in the first few years itself.

In the II table, we can see the net benefit getting from AD when we compare it with book depreciation calculated under the straight line method.

This will have a direct impact on the profits as net income will come down if depreciation expense is increasing resulting in less tax burden.

To find out how much the leveled benefit one can avail (considering the average and fixed tariff adjusted for inflation) in per unit we calculate the discounting factor. In this case the per unit tariff is 2.22.

Calculation of AD under solar :

Years	Unit	1	2	3	4	5
Book Depreciation		2.64%	5.28%	5.28%	5.28%	5.28%
Book Depreciation (Capital cost*Book depreciation)	Rs Lakh	21.12	42.24	42.24	42.24	42.24

Opening	%	100%	60%	12%	2%
Allowed during the year	%	40%	48.00%	9.60%	1.92%
Closing	%	60%	12%	2.40%	0.48%
Accelerated Depreciation	Rs Lakh	320.00	384.00	76.80	15.36
Net Depreciation Benefit	Rs Lakh	298.88	341.76	34.56	-26.88
Tax Benefit	Rs Lakh	101.59	116.16	11.75	-9.14

Table source: FGE

What is Accelerated Depreciation in solar power generation and how can I benefit from it?  - See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf

What is Accelerated Depreciation in solar power generation and how can I benefit from it?  - See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf

What is Accelerated Depreciation in solar power generation and how can I benefit from it? 
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf

What is Accelerated Depreciation in solar power generation and how can I benefit from it? 
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf

What is Accelerated Depreciation in solar power generation and how can I benefit from it? 
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf

What is Accelerated Depreciation in solar power generation and how can I benefit from it? 
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf

ACCELERATED DEPRECIATION

ACCELERATED DEPRECIATION

ACCELERATED DEPRECIATION

ACCELERATED DEPRECIATION

Renewable Energy Mix, Indian Grid

Electricity can be produced directly from biomass by Solar-induced hybrid fuel cell

A new solar-induced direct biomass-to-electricity hybrid fuel cell can operate on fuels as varied as powdered wood. The fuel cell

relies on a polyoxometalate (POM) catalyst (shown in the vials) which changes color as it reacts with light.

Now, researchers at the Georgia Institute of Technology have developed a new type of low-temperature fuel cell that directly converts biomass to electricity with assistance from a catalyst activated by solar or thermal energy. The hybrid fuel cell can use a wide variety of biomass sources, including starch, cellulose, lignin -- and even switchgrass, powdered wood, algae and waste from poultry processing.
The device could be used in small-scale units to provide electricity for developing nations, as well as for larger facilities to provide power where significant quantities of biomass are available.

The challenge for biomass fuel cells is that the carbon-carbon bonds of the biomass -- a natural polymer -- cannot be easily broken down by conventional catalysts, including expensive precious metals, Deng noted. To overcome that challenge, scientists have developed microbial fuel cells in which microbes or enzymes break down the biomass. But that process has many drawbacks: power output from such cells is limited, microbes or enzymes can only selectively break down certain types of biomass, and the microbial system can be deactivated by many factors.

The system provides major advantages, including combining the photochemical and solar-thermal biomass degradation in a single chemical process, leading to high solar conversion and effective biomass degradation. It also does not use expensive noble metals as anode catalysts because the fuel oxidation reactions are catalyzed by the POM in solution. Finally, because the POM is chemically stable, the hybrid fuel cell can use unpurified polymeric biomass without concern for poisoning noble metal anodes.
The system can use soluble biomass, or organic materials suspended in a liquid. In experiments, the fuel cell operated for as long as 20 hours, indicating that the POM catalyst can be re-used without further treatment.

Source : Science daily