Why do some folks say solar power costs Rs 10/unit?

I was a speaker at the recently concluded InterSolar conference at Mumbai.

My topic of presentation was the use of solar for reduction of diesel used in backup power generators.

During my speech, I briefly mentioned that the cost of solar power from rooftop solar is only Rs 3.5-4 per unit.

Boy, did that create a storm!

Once my speech was over, at least a dozen guys from the audience confronted me – or should I say challenged me – to prove that the cost was Rs 3.5 per unit. They were all hearing that solar power from rooftop costs anywhere between Rs 8-10 per unit.

Some of them politely hinted that I was misleading them. How could I say a cost that is just 40% what the rest of the industry says?

Well, I told them once more the context under which solar power from rooftop costs Rs 3.5 per unit

  • This is from rooftop, and not from grid connected, utility solar power plants
  • A grid tied power plant with no batteries
  • You are not using a super-high efficiency solar panels with 22% efficiency but good quality solar panels with 17% efficiency.
  • Assumption of not too many power shutdowns

Even after I mentioned these qualifications, they were not convinced. One of them mentioned a recent report from a well-known solar consulting firm that had apparently suggested the cost of solar power from rooftops was in the range of Rs. 10 per unit.

All I told them was this: Look, we can show you the calculation, can others who claim it is Rs. 10 per unit show their calculations?

And our calculations were simple, and you can find these from this post.

In fact, I told them, we have been fairly conservative in our estimates.

I am telling you this once more: The cost of solar power from rooftops under grid-tied, no batteries, good quality solar panels is not higher than Rs 4 per unit, if you wish to be too conservative.

Hands-on Inputs, Recommendations and Steps for Rooftop Solar Installations

Check out India Rooftop solar Advisor – Expert Guidance for Industrial or commercial Rooftop. More from here

If someone is telling you this number is wrong, show them the calculations here, and ask THEM TO SHOW THEIR CALCULATIONS.

You might of course ask why some of the experts are claiming the price to be Rs. 10 per unit.

I actually went through some calculations shown by some of the industry guys that show a cost of Rs. 10 or more per unit – and I can tell you their calculations are wrong.

They had assumed aspects which simply are not relevant for rooftop solar

  1. They had assumed a dedicated maintenance cost for rooftop solar of 1-2% of total project cost, year after year. I can tell you that this is not the way it works in rooftop solar power plants. There is no dedicated labour to maintain rooftop solar and the cost of maintenance will be a fraction of 1% of project cost
  2. Some had taken interest cost of 13-14% for probably 7-8 years. Now, this is once again a wrong metric to apply for rooftop solar. I can take you through a long and detailed discussion, but I will spare you the trouble and state it more simply – factoring interest rate directly for an investment which also produces savings year or year is not good financial sense.
  3. Some folks also inexplicably reduce the solar generation every year with the cost of capital. This is wrong plain and simple. Sure, you can take a derating factor for solar panels, but that has nothing to do with the cost of capital!

In our opinion, the reason why many are coming up with ridiculous estimates for costs are because they incorrectly apply a calculation framework adopted straight from the utility-scale, grid connected solar power plants.

If anyone sits for an hour with a good understanding of how rooftop solar power plants are operated, they will agree that our calculations here reflect reality.

And that shows a cost of not more than Rs. 4 per unit.

I mean, this is fifth grade arithmetic. Give me a break.

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