Personal Finance

Shedding some light on solar power

Meera Siva | Updated on April 07, 2019 Published on April 07, 2019

Roof-top solar power for homes is attractive, but keep a few points in mind

Installing solar panels on your terrace to generate power can be a rewarding idea in many ways. If you face frequent power-cuts, a rooftop plant may be a great solution. You get electricity at a price that is now comparable to or lower than conventional sources of power. There are also environmental benefits, as solar is a clean source of energy. Plus, it is more efficient to generate power close to where it is consumed, as it eliminates transmission losses (which are about 20 per cent).

That said, consider ownership models, cost, maintenance and other issues to decide if this is suitable for you.

Available methods

You can select from one of three ways to set up a roof-top solar power generation plant. The first one, which is the most popular, is the ownership model. In this, as a home owner you pay for the equipment and installation, and use the power. You can get a subsidy of ₹18,000 per kW of installed power from the Ministry of Renewable Energy (MNRE) under the Sustainable Rooftop Implementation for Solar Transfiguration of India’ (SRISTI) scheme. Different State governments such as Tamil Nadu also have subsidy schemes.

Under the second model, the owner gives terrace space to a government or private entity to install the equipment. In return, they get financial benefits.

For example, in Kerala, if you go with the utility-owned model, you can get 10 per cent of the electricity produced for free. Alternatively, you can buy any quantity of electricity produced at a fixed rate.

The third model is community ownership, which may be suitable for renters, home owners with unsuitable roofs to produce power or where the roof is shared by many. The unit is set up collectively (in the same site or elsewhere) and the benefits are shared proportionally.


Your cost depends on the area available and the installed capacity. The general rule of thumb is that you need 220 sqft for a 1 kW plant which can generate about five units in a day (with 5-6 hours of sunshine). The calculations vary with location, based on solar intensity.

You must also account for component and installation expenses. The panels (photo-voltaic modules) account for about half of the total expense and have been on a downtrend in the past few years. For instance, from about ₹1 lakh per kW about five years ago, it is now down to ₹40,000 to 60,000/kW. The life of these panels is typically 25-35 years, and they do not require much maintenance.

Inverters, which convert the power generated to be suitable for domestic use, account for a fourth of the cost. Wiring and other components and installation account for the other quarter of the price.

You can also buy kits that include all the essential items. These are typically available from 1 kW capacities and may also come with mobile apps to monitor power generation. The kit providers also give extended warranty and service guarantees.

These costs are for grid-connected systems where you can export excess power and get credits through net-metering. Your per-KW price tends to decrease as you install larger units.

Costs, however, increase substantially if you go for battery backup, which may be required for off-grid solutions.

The benchmark per-Watt cost (from MNRE) is ₹60 for grid-connected and ₹100 for off-grid systems with a six-hour battery storage.

Your return on investment depends on your cost, subsidy and the cost of electricity. At ₹8 per unit, a 1KW unit would save you about ₹9,600 per year (assuming eight months of operation, generating 5W per day). If your cost was ₹50,000 (after subsidy), you can get your return in five years, and continue to reap the benefits for 20 or more years afterwards.

Key issues

Before you decide to make power when the sun shines, be aware of the issues. One, you must note that the idea makes sense only in sun-rich States. Check the solar intensity of the region.

Two, be aware of the problems in battery systems. It adds to the initial cost and requires ongoing maintenance and replacement expenses. Also, there is energy loss on charging and discharging, which adds to the cost of power.

Three, do not bank on getting subsidies. Rules vary with States, and be sure to know the restrictions and procedures. Be prepared for delays — completion of site inspection and getting net meters installed by the authorities take a lot of time.

Four, government policies are not yet completely favourable to key aspects such as net-metering. For instance, Tamil Nadu caps capacity at 1 kW for subsidy (₹20,000 per kW). The credit for net-metering power exported to the grid is capped at 90 per cent of the energy drawn during a 12-month settlement period. In Gujarat, capacity is capped at 50 per cent of the contract load or the limit sanctioned for the first two years of the agreement.

Five, there are issues with installation and service. Wrong installation of panels, unsafe wiring and lack of design standards increase risk of accident. And with imported panels and components, after-sales service and availability of parts become a concern.

The writer is an independent financial consultant

Published on April 07, 2019
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