2020: You signed EPC contract for 50MW solar. ₹14 crore. Lowest bid.
2025: O&M costs ₹8 crore/year. Plant availability 87% (should be 98%).
Your competitor paid ₹16 crore for same capacity. Their O&M: ₹1.5 crore/year. Availability: 97%.
You "saved" ₹2 crore upfront. You paid ₹32.5 crore extra over 5 years.
Why turnkey EPC is a trap
Typical EPC contract structure:
Phase 1: Construction (Year 0)
- EPC quotes ₹2.80-3.20 crore per MW
- Payment milestones: 10% advance, 80% on commissioning, 10% after 1 year
- Includes: Design, equipment, installation, commissioning
- Contract duration: 12-18 months
Phase 2: O&M (Year 1-25)
- Optional O&M contract: ₹0.08-0.15 per kWh generated
- Or: You handle O&M yourself
- EPC has no incentive for quality (they already got paid)
- Equipment failures = your problem
The incentive misalignment:
EPC wants to:
- Win bid (lowest price)
- Minimize construction cost (maximize margin)
- Commission plant fast (get paid)
- Exit (move to next project)
EPC doesn't care about:
- Long-term performance (they won't operate it)
- Maintenance costs (not their problem)
- Equipment quality (cheaper = higher margin)
Result: They optimize for construction cost, not lifetime value.
How EPC contractors cut costs
Component quality (invisible to buyer):
Solar panels:
- Tier 1 brand: ₹25-28 per watt (Longi, JinkoSolar, Canadian Solar)
- Tier 2 brand: ₹20-23 per watt (unknown brands, same datasheet specs)
- Actual difference: Tier 2 degrades 1-2% faster per year
- 25-year impact: Tier 2 produces 15-20% less energy
Inverters:
- Tier 1: ₹0.30-0.35 per watt (SMA, Huawei, SolarEdge)
- Tier 2: ₹0.22-0.28 per watt (Chinese brands)
- Failure rate: Tier 1 = 2-3% over 10 years, Tier 2 = 15-20%
- Replacement cost: ₹15-20 lakh per inverter
Mounting structure:
- Hot-dip galvanized: ₹45-55 per kg (lasts 25 years)
- Standard galvanized: ₹35-42 per kg (rusts after 8-10 years)
- Replacement cost: ₹3-4 crore (Year 10)
Cabling:
- Solar-rated cable: ₹80-100 per meter (UV resistant, 25-year life)
- Standard cable: ₹50-65 per meter (degrades in sun, fails after 5-7 years)
- Rewiring cost: ₹2-3 crore
Monitoring system:
- Comprehensive: ₹50-80 lakh (string-level monitoring, predictive maintenance)
- Basic: ₹15-25 lakh (plant-level only, no diagnostics)
- Impact: With good monitoring, catch failures 2-3 days earlier → 15-20% less downtime
Total cost difference:
Good quality (Tier 1 everything):
- 50MW EPC cost: ₹160-175 crore (₹3.20-3.50 crore per MW)
Cheap quality (Tier 2 everything):
- 50MW EPC cost: ₹140-155 crore (₹2.80-3.10 crore per MW)
Upfront savings: ₹20 crore
But you pay for it later.
The 25-year cost breakdown
Scenario A: Cheap EPC (₹140 crore), you handle O&M
Year 0: ₹140 crore Years 1-25:
- Regular O&M: ₹6-8 crore/year
- Inverter replacements (Year 8, 16): ₹8-10 crore each
- Structure re-galvanization (Year 10, 20): ₹2-3 crore each
- Cable replacement (Year 7, 14, 21): ₹2 crore each
- Lost generation (87% vs 98% availability): ₹8-12 crore/year
Total 25-year cost: ₹140 + (₹12 × 25) + ₹18 + ₹5 + ₹6 = ₹469 crore
Scenario B: Quality EPC (₹160 crore), we operate
Year 0: ₹160 crore Years 1-25:
- Operated O&M (included in PPA): ₹0/year additional
- Inverter replacements: ₹0 (our problem, we chose quality)
- Structure maintenance: ₹0 (designed for 25 years)
- Cable replacement: ₹0 (solar-rated from day one)
- Lost generation: Minimal (97-98% availability)
Total 25-year cost: ₹160 crore (all-in via PPA at ₹4.20/kWh)
Savings: ₹309 crore over 25 years
You "saved" ₹20 crore upfront. You lost ₹309 crore over the plant life.
O&M cost comparison
DIY O&M (you hired contractor after cheap EPC):
Annual costs for 50MW:
- 15 permanent staff: ₹1.8-2.5 crore/year
- Panel cleaning (weekly): ₹80-120 lakh/year
- Vegetation management: ₹40-60 lakh/year
- Inverter preventive maintenance: ₹50-80 lakh/year
- Monitoring system: ₹20-30 lakh/year
- Spare parts inventory: ₹1-1.5 crore/year
- Unplanned repairs: ₹2-3 crore/year (due to cheap equipment)
- Insurance: ₹1-1.5 crore/year
Total: ₹7.9-11.6 crore/year
Availability: 85-90% (reactive maintenance only)
EPC O&M contract (from original cheap contractor):
Annual cost:
- Performance-based: ₹0.08-0.12 per kWh
- 50MW × 5 hours × 365 days = 91,250 MWh/year
- Cost: ₹7.3-10.9 crore/year
But they have no incentive to maintain well (they didn't install quality equipment).
Availability: 88-92% (they do minimum to avoid penalties)
Our operated model (we built quality from day one):
Annual cost:
- Included in PPA price (₹4.20/kWh vs ₹3.80/kWh for unmanaged)
- Incremental cost: ₹0.40/kWh
- 91,250 MWh × ₹0.40 = ₹3.65 crore/year
But we installed Tier 1 equipment, so maintenance costs are lower:
- Fewer failures
- Longer component life
- Predictive maintenance (fix before failure)
Availability: 97-98% (our revenue depends on it)
Effective annual O&M comparison:
- DIY: ₹7.9-11.6 crore/year, 85-90% availability
- EPC contract: ₹7.3-10.9 crore/year, 88-92% availability
- Our operated model: ₹3.65 crore/year, 97-98% availability
Annual savings: ₹4-8 crore
Plus you get 8-13% more generation from higher availability.
The equipment replacement trap
What cheap EPC doesn't tell you:
Inverters fail. A lot.
Tier 2 inverters:
- Failure rate: 15-20% over 10 years
- 50MW plant: 25 inverters (2MW each)
- Failures: 4-5 inverters by Year 10
- Replacement cost: ₹15-20 lakh each
- Total cost: ₹60-100 lakh by Year 10
Then failures accelerate:
- Year 10-15: Another 5-6 failures (₹75-120 lakh)
- Year 15-20: Replace most remaining (₹200-300 lakh)
Total inverter replacement over 25 years: ₹4-6 crore
Tier 1 inverters:
- Failure rate: 2-3% over 10 years
- Failures by Year 10: 0-1 inverter
- Most last 15-18 years
- One round of replacement (Year 16-18): ₹3-4 crore
But we budget for this upfront. You don't.
Structure corrosion:
Standard galvanization:
- Starts rusting: Year 6-8
- Structural integrity compromised: Year 10-12
- Options: Re-galvanize (₹2-3 crore) or replace (₹5-7 crore)
Hot-dip galvanization:
- Lasts full 25 years
- No mid-life costs
Incremental upfront cost: ₹1-1.5 crore Savings over 25 years: ₹5-10 crore
Availability and lost generation
Why availability matters more than upfront cost:
50MW solar plant:
- Annual generation (theoretical): 91,250 MWh
- At ₹4/kWh (PPA rate): ₹36.5 crore/year revenue
At 87% availability (cheap plant, reactive O&M):
- Actual generation: 79,388 MWh
- Lost generation: 11,862 MWh
- Lost revenue: ₹4.74 crore/year
- 25-year impact: ₹118.5 crore lost
At 97% availability (quality plant, predictive O&M):
- Actual generation: 88,513 MWh
- Lost generation: 2,737 MWh
- Lost revenue: ₹1.09 crore/year
- 25-year impact: ₹27.4 crore lost
Difference: ₹91 crore over 25 years
You "saved" ₹20 crore on EPC.
You lost ₹91 crore in generation.
Performance degradation
Panel degradation rates matter:
Tier 1 panels:
- Year 1: 2-3% degradation
- Years 2-25: 0.4-0.5% per year
- Year 25: 85-88% of original capacity
Tier 2 panels:
- Year 1: 3-4% degradation
- Years 2-25: 0.7-1.0% per year
- Year 25: 70-78% of original capacity
Generation comparison:
Year 10:
- Tier 1: 91.5% capacity → 83,543 MWh
- Tier 2: 88.0% capacity → 80,300 MWh
- Difference: 3,243 MWh = ₹1.3 crore
Year 25:
- Tier 1: 86.5% capacity → 78,931 MWh
- Tier 2: 75.0% capacity → 68,438 MWh
- Difference: 10,493 MWh = ₹4.2 crore per year
Cumulative 25-year lost generation: ₹50-60 crore
Insurance and warranty issues
Cheap EPC impact on insurance:
Equipment insurance:
- Tier 1 equipment: ₹80-100 lakh/year premium
- Tier 2 equipment: ₹120-180 lakh/year (higher risk)
- Difference: ₹40-80 lakh/year
- 25 years: ₹10-20 crore extra
Performance guarantee insurance:
- Good EPC: Available, ₹40-60 lakh/year
- Cheap EPC: Often unavailable (insurers know the risk)
- If available: ₹100-150 lakh/year
Warranty claims:
Tier 1 suppliers:
- Global presence
- Warranty honored
- Replacement shipped within 30 days
Tier 2 suppliers:
- Often exit India market after 5-7 years
- Warranty claims denied ("user error")
- Replacements take 6-12 months
- You pay for temporary replacements
Our model: Build and operate
Why we won't build something we won't operate:
Traditional EPC:
- Builds cheap → maximizes profit
- Hands over to you → exits
- No long-term accountability
Our model:
- Builds quality → we'll operate it for 25 years
- We own 74% → our revenue depends on performance
- Full accountability
What this means for component selection:
We choose Tier 1 everything because:
- Lower O&M costs (we pay)
- Higher availability (our revenue)
- Fewer replacements (our capital)
- Better insurance rates (we pay)
Result:
- Upfront cost: 10-15% higher
- 25-year cost: 30-40% lower
- Availability: 97-98% vs 85-90%
Real example: Two identical projects
Project A: Cheap EPC + self-operated
- Location: Gujarat, 50MW
- EPC cost (2020): ₹140 crore (₹2.80 crore/MW)
- EPC contractor: Tier 2 developer (won on price)
5-year results:
- O&M costs: ₹8.2 crore/year
- Availability: 86% average
- Major replacements: 3 inverters (₹48 lakh), structure repairs (₹85 lakh)
- Total 5-year cost: ₹140 + (₹8.2 × 5) + ₹1.33 = ₹182.3 crore
- Generation: 367,000 MWh (81% of theoretical)
Project B: Quality build + we operate
- Location: Gujarat, 50MW (adjacent site)
- EPC cost (2020): ₹162 crore (₹3.24 crore/MW)
- Builder: Us (operated model)
5-year results:
- O&M costs: ₹3.8 crore/year (included in PPA)
- Availability: 97% average
- Major replacements: 0
- Total 5-year cost: ₹162 + (₹3.8 × 5) = ₹181 crore
- Generation: 440,000 MWh (96% of theoretical)
5-year comparison:
- Project A: ₹182.3 crore cost, 367,000 MWh
- Project B: ₹181 crore cost, 440,000 MWh
Project B generated 73,000 MWh more (20% more energy).
At ₹4/kWh: ₹29.2 crore additional revenue.
Project A "saved" ₹22 crore upfront. Lost ₹29.2 crore in 5 years.
What to look for in EPC contracts
If you insist on traditional EPC model:
Red flags:
- Lowest bid by >10%: They cut corners somewhere
- No performance guarantees: They don't believe in their equipment
- Short warranty: Standard is 5-10 years, good is 15-25 years
- No Tier 1 equipment clause: They'll substitute cheap components
- No O&M track record: They've never operated what they built
Must-have contract clauses:
- Equipment brand specifications: Name Tier 1 brands explicitly
- Performance liquidated damages: ₹X/kWh for underperformance
- Availability guarantee: 95%+ with penalties for below
- Extended warranty: 10-15 years minimum
- Mandatory O&M: EPC must operate for 5-10 years (skin in the game)
Better: Don't separate build and operate.
The bottom line
"Turnkey" EPC optimizes for construction cost, not lifetime value.
EPC gets paid after 18 months, exits. You pay O&M for 25 years.
Typical result:
- Save 10-15% on construction
- Pay 2-3× more on O&M
- Lose 10-15% generation from poor availability
- Total cost: 40-50% higher over plant life
Our model:
- Pay 10-15% more upfront (quality equipment)
- We operate it (our revenue depends on performance)
- 97-98% availability (vs 85-90%)
- Total cost: 30-40% lower over 25 years
You pay ₹4.20/kWh all-in. We handle everything.
- Solar plant design
- Quality equipment (Tier 1 everything)
- Construction
- Operations
- Maintenance
- Replacements
- Insurance
- All O&M costs
One price. Zero surprises. 25 years.
The cheap EPC will cost you ₹20-40 crore less upfront.
And ₹100-300 crore more over the plant life.
We won't build something we're not willing to operate for 25 years.