The cost of a rooftop solar PV system depends on the function it serves (to feed power into the grid, to support the load during a power failure, etc.) and incentives/subsidies available. It should be noted that all solar PV systems function by matching the voltage from some other source. Therefore the system has to be integrated with the grid, a battery backup, or a diesel generator.

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Types of rooftop solar PV systems

Rooftop solar PV systems are of 3 types:

  1. Grid-tied – These systems are designed to work with the grid alone. Thus, it is a combination of solar PV and grid. As these systems depend on the reference voltage provided by the grid for their operations, grid-tied systems do not work when the grid is down.
  2. Grid-interactive – This system works in conjunction with either a battery backup or diesel generator to support the load even during a power failure.
  3. Off-grid – Off-grid systems are designed to operate independent of the grid, these systems sync with a diesel generator and/or batteries. Battery based systems used to be of smaller capacity due to the cost involved, but the rising cost of other power sources, and the lack of power at any cost has seen a steady increase in battery based system sizes

The difference between the systems lies in the kind of inverter used, and the inclusion of batteries. As various vendors use different terminology for these systems we urge you to verify the functions of the offered system rather than going by the name alone.

Component Cost of Rooftop PV systems

At Solar Mango, we are regularly asked the cost break-up and particulare of rooftop solar power plants. But before answering that, let’s list down the components of a rooftop plant: Solar panels that convert sunshine to DC electricity Inverters that convert DC electricity to AC

But before answering that, let’s list down the components of a rooftop plant: Solar panels that convert sunshine to DC electricity Inverters that convert DC electricity to AC

Solar panels that convert sunshine to DC electricity Inverters that convert DC electricity to AC

  • Inverters that convert DC electricity to AC form
  • Cables : DC cables  convey current from panels to inverters and AC cables from inverters to loads
  • Mounting Structures : They support the panels on the rooftops
  • Electrical Peripherals : These include Junction Boxes, Earthing, Lightning Arrestors, Conduits etc.All of these are highly specific to the   design of the power plant
  • Lastly another cost component is the actual supervision, design and installation for the power plant

With technological advancement, year on year, solar industry is experiencing significant price reductions.

Solar Mango estimates a rooftop solar power plant to cost between Rs. 55 – 60 per Watt, depending on the quality of components chosen.We have given ballpark numbers for the costs of rooftop power plant components below – and this holds for 2016:

Component Cost/Watt (Rs.)
Solar Modules 32-35
Inverters 6-12
Cables 1-2
Structures 1.7-5
Peripherals (JBs, DC protection systems, earthing, lightning arrestor) 2
Supervision, design and installation 4

Note 1:

 We have not considered battery backup as that can alter the economics significantly depending on the extent of battery backup (autonomy) required. Not only do batteries add to the initial cost, recurring maintenance, and replacement expenditure, the energy loss on charging and drawing from the battery also adds to the cost of power. A battery backup could add significant costs to the above system.

Note 2:

 We have not considered Thin-Film modules as they require more installation area for the same capacity as crystalline modules and are therefore not preferred for rooftop installations where space is usually a constraint.

Subsidies & Incentives

Several incentives are available for rooftop solar PV plants worldwide. While the specifics of the incentives could vary from country to another, these incentives broadly fall under the following categories:

  • Accelerated Depreciation
  • Capital Subsidy
  • Income Tax Credits
 Accelerated Depreciation (AD)

Accelerated depreciation of 80% is available until March ,2017  under the Income Tax act for rooftop solar PV systems. The depreciation benefit is to be halved to 40% from April 1st,2017.This can provide significant savings to a solar plant developer who is a taxable assesse and has sufficient profits against which the depreciation can be charged.

An illustration of Tax Savings from Accelerated Depreciation Benefit is shown below:
Item Rs
Cost of a 100 kW rooftop solar plant (A) 6000000
Accelerated depreciation @40% 2400000
Corporate tax rate* 35%
Tax saved through depreciation (B) 840000
Net cost of rooftop solar plant (A)-(B) 5160000

Capital Subsidy

Governments in many countries provide a capital subsidy for the investment made for rooftop solar power plants.
The subsidy calculation is illustrated in this table for an assumed capital subsidy of 30%

Savings from capital subsidy
Item Rs
Cost of a 1oo kW rooftop solar plant 6000000
Subsidy @30% of actual cost 18000000
Net cost after subsidy benefit 4200000

Investment Tax Credits

Investment tax credits work similar to capital subsidies. Here, instead of a direct subsidy on the capital cost, your income tax is deducted by the amount of incentive.
The subsidy calculation is illustrated in this table for an assumed income tax of 30%:

Savings from Investment Tax Credit
Item Rs.
Cost of a 100 kW rooftop solar plant 6000000
Amount deducted from your income 6000000
Tax amount saved @30% income tax 18000000
Net capital cost to the installer 4200000

 

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Final Cost of Rooftop PV system Factoring in AD and Subsidies

Rooftop PV system cost after factoring in AD and Subsidy benefit

The final cost to setup the PV plant, after factoring in Accelerated Depreciation and Subsidy benefit will be: (for a plant without batteries)
This is for commercial sector with accelerated depreciation benefits. For residential sector, they can do a similar calculation, but with investment tax credits as the incentive in place of accelerated depreciation.

Final cost of 1 kW rooftop PV plant
Item Rs
Cost of a 100 kW rooftop solar plant 6000000
Subsidy @ 30% 18000000
Net cost after subsidy 4200000
Accelerated depreciation @40% 1680000
Tax rate 35%
Tax saved through depreciation 588000
Net cost after both AD and Subsidy 3612000

Prospects for Further Cost Reduction

One of the questions we are regularly asked is if project cost is likely to reduce significantly in future, as the price of solar PV modules has seen a substantial decrease in recent years.

Though PV modules have decreased in price they form only half the cost of the total project; further decrease, if any, will only affect that portion and therefore impact on total project cost will be limited. The prices of the other components have not decreased the way the price of PV modules has decreased. Therefore we do not expect to see much reduction in project cost in the near future.

Variations in Pricing

Prices of solar PV systems offered by various vendors can differ significantly. There can be several reasons for the variations in price, such as

  • Overstatement of capacity – Some vendors advertise a rooftop system with 1 KW modules (solar panels) and a 5 kW inverter as a 5 KW system. As the electricity is generated by the modules this system only has a 1 kW capacity and the price offered by the vendor should be compared with other 1 KW systems and not 5 kW plants
  • Brands – Products from Tier I manufacturers are typically more expensive but offer much better performance and reliability
  • Certifications/Standards – Products that are certified and meet quality standards are more expensive
  • Warranties – The price of the system can depend on the warranties offered.
  • PV Panels – Industry standard warranty is
  • 10-year manufacturer warranty
  • 25- year performance warranty
  • Other systems – Inverters, mounting structures, cables, junction boxes, etc. typically come with a 1 year manufacturer warranty which can be extended to 5 years
Takeaways

  • A 1 KW rooftop plant costs about Rs.55000-60000 depending on the components (exclsuive of battery costs)
  • A battery backup could add considerably to this cost but is not recommended unless absolutely necessary due to losses when charging or drawing power
  • Any further decrease in PV module prices are not likely to significantly reduce project cost as modules comprise only half the total cost of the project
  • Customers should check that the PV plant capacity quoted by vendor is for the module capacity and not the inverter capacity

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