Q1. What are my solar buying and financing options?
There are three solar buying and solar financing options for you:
- Buying a Solar PV system (CAPEX Model): You purchase the Solar PV system upfront and can avail various bank loan options to finance your Solar PV system.
- Buying only solar power (RESCO Model): A solar power developer owns the Solar PV system setup on your rooftop/ land. You only pay for the generated electricity at a pre-agreed tariff. This usually requires a long-term buying commitment and guarantees from your side and entails a lengthy credit appraisal process.
- Equipment leasing: An equipment leasing company will lease the Solar PV system to you and will charge you a fixed monthly/ periodic fee. This also requires long term commitments and guarantees from buyers. However, equipment leasing is not widely available as of now.
Q2.What is net metering?
Net metering allows you to sell excess (unconsumed) solar power back to the grid. For example, if on a given day you generated 20 units from solar and consumed only 18 units, the balance 2 units will be sold back to the grid. This ensures that you maximize your savings from solar.
Do I need to replace my existing meter for net metering?
Yes, you will need to get your meter replaced with a bidirectional energy meter as per the process of your local discom at a nominal charge. Typically your system installer will help you with the process.
Which is better for me – Buying a Solar PV system or buying solar power?
Buying a Solar PV system is relatively easier and also maximizes your financial returns. In case of companies, depreciation benefits can also be availed through this option. If you are only looking to buy power and give long-term financial commitments & guarantees, you can consider buying solar power. However, since this option requires a lengthy credit appraisal process, it is available only to a few selective buyers as of now.
How can I avail loan for solar PV system?
Depending upon your user category you can choose between various loan facilities such as home loans, retail loans, business loans, etc. If you are a residential customer, you could avail a top-up home loan or a consumer/ retail loan or something as simple as credit card linked payment plan. Banks also provide loans to commercial and industrial consumers for installing solar PV systems. RBI has also accorded ‘Solar’ a Priority Sector Lending status mandating banks to provide loans for solar at preferential interest rates.
What if I move to another place?
Solar PV systems can be easily dismantled and moved. However, before moving the system please check with your system installer on your system warranties. In case of RESCO model, since you will have a long term commitment to buy power, check your contractual terms with the developer.
Q3. How much does a Solar PV system cost?
Solar PV system costs vary depending on the size of the system. An on-grid system of a size up to 10kWp costs Rs. 40-50/Wp, between 10 – 100 kWp costs Rs. 35-40/Wp and above 100KWp costs Rs. 30-32/Wp systems.
For utility-scale solar projects, costs can be even lower than Rs. 30/Wp. However, for off-grid systems with battery backup cost goes up significantly and lies between Rs.100 -125/ Wp.
How does this upfront system cost translate into per unit cost of power?
It makes sense to evaluate your upfront system cost by converting it into Rs/ kWh (per unit cost) also known as levelized cost. That helps you compare the cost of your solar power with that from the grid.
Illustration for an average residential customer in Delhi:
A 2kW Solar PV system costs around Rs 1 lacs and has a life of at least 25 years with low recurring costs. This translates to a per unit levellized cost of Rs7 – 8 /kWh for the next 25 years
Lets compare this with the cost of grid power. The discom charges him slab-wise but on an average he pays Rs 7.3/kWh. And this price keeps increasing by about 5% per annum, which means you may be paying Rs 24.7/kWh at the end of 25 years. This translates to a per unit levelized cost of approx. Rs 10 – 11/kWh when compared with the 25 year life of Solar PV system.
At what price can I buy solar power under RESCO model?
If you do not own a Solar PV system and just buy solar power from a developer, the per unit cost will be higher as the developer will add his expenses, profit margin, cost of risk, etc. over and above the cost of the Solar PV system. Therefore your cost per unit of power under the RESCO model will always be significantly higher than the cost per unit when you own the Solar PV system.
Q4. Do I need to buy Insurance for my Solar PV system?
Solar PV systems are highly reliable if designed well. Moreover, the key components of a Solar PV system are backed by guarantees & warranties . However, since solar is like any other asset that you own, it is generally advisable to buy an insurance cover.
How can I get my PV system Insured?
Most of the insurance companies now a days provide policies to insure your Solar PV system.
For residential customers it is recommended to take policies for Fire and burglary risks. In addition, for Industrial and commercial consumer policies for machinery break down , public liability and terrorism may be taken.
How does solar power compare with diesel generator (DG) and Home Inverter?
Diesel Generators (DG) are not just a highly expensive means of power generation but are also extremely damaging to the environment. And contrary to popular belief, the cost of energy from home inverters is also very high. The cost of power from a typical DG in a housing society is Rs. 17 – 18/ unit (kWh), while from a typical home inverter it is Rs. 14/ unit (kWh). In comparison solar is a much cheaper and cleaner source of energy.
Should I buy solar now or wait?
For most Indian electricity consumers, the answer is Go Solar Now!
Solar PV is a proven technology and with today’s reduced costs, the levelized cost of Solar electricity is lower than the grid electricity tariff for a lot of consumers. For example, if a consumer’s electricity tariff is Rs. 6.5/ unit and he decides to go solar today, he can expect an IRR of anywhere between 24% – 36%, however if he delays the decision to go solar by even a year, his returns will go down to 22% – 23%. However, if your cost of grid electricity is very low, it may make sense to wait for some time.
Q5. What is the return on investment (ROI) and payback period of solar PV?
Payback period for your solar PV system stands for the amount of time it takes for your initial investment in the system to be recovered from the savings it leads to and Return on Investment (ROI) refers to the effective returns that your investment would generate. The higher your monthly savings, the quicker your initial investment would be repaid and the higher your ROI would be. Typically, commercial & industrial consumers should expect payback in 2 – 3 years and residential consumers should expect payback in 2- 3 years. Once the initial cost of your system is paid back, the energy generated by it for the next 21 – 22 years is almost free of cost.