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.
Types of rooftop solar PV systems
Rooftop solar PV systems are of 3 types:
- 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.
- Grid-interactive – This system works in conjunction with either a battery backup or diesel generator to support the load even during a power failure.
- 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:
|Peripherals (JBs, DC protection systems, earthing, lightning arrestor)||2|
|Supervision, design and installation||4|
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.
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 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.
|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|
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|
|Cost of a 1oo kW rooftop solar plant||6000000|
|Subsidy @30% of actual cost||1800000|
|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|
|Cost of a 100 kW rooftop solar plant||6000000|
|Amount deducted from your income||6000000|
|Tax amount saved @30% income tax||1800000|
|Net capital cost to the installer||4200000|
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|
|Cost of a 100 kW rooftop solar plant||6000000|
|Subsidy @ 30%||1800000|
|Net cost after subsidy||4200000|
|Accelerated depreciation @40%||1680000|
|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