Cost and Benefits of Solar Roof top power plants for Commercial and Industrial consumers in India

Solar power plants  can be installed by different type of consumers in India  - Domestic consumers or home owners  ( including Apartment common areas ) , Commercial building consumers , Industrial or Factory consumers. In our earlier blog we looked at the cost of Solar power plants for Home owners and Apartments  - in this blog we will be looking at Commercial and Industrial consumers - how the cost and benefits of Solar power plant would work out for these consumers. 

On-Grid Solar power plants 

First we look at On grid Solar power systems - for Commercial and Industrial installations. Some of the key considerations for Commercial or Industrial consumers when looking at On-Grid Solar Roof Top power plants would be : 

-What is the variable tariff that they are paying per unit of electricity 
-Can they avail Net metering, Gross metering or do they need to install Captive plant 
-How long will they stay at the location ( if rented ) 
-Can they avail loan and tax benefits,  or can they lease the plant
-How is the Payback and benefits for different users 

Electricity Tariff and monthly consumption

Escoms use different structures of tariff for  Commercial , Industrial and non -residential consumers . There are fixed monthly fees per kW of installed capacity, there are variable tariffs which are set for levels of usage  ( higher for more usage), and different types of incentives like Time of Day discount , seasonal discounts and in some states there are even surcharges levied on Solar power plant for the power generated by them. Solar roof top power for such users will only help to reduce the variable tariff of power for the sunshine hours and any taxes on that , as the fixed tariff and night time reductions will remain unchanged due to Solar power savings. The average monthly consumption of the user will be the guide to sizing the Solar roof top power plant, as the average yield from the Solar power plant will be 4 units a day for every kwp installed ( see our earlier blogs for the basics of solar roof top power generation). If the facility does not consume full power on Weekends - that needs to be factored in the under utilized power and payback calculations. The only difference between Commercial and Industrial would be the savings rate - based on their tariff being paid.

Type of metering allowed by ESCOM 

Since Solar power is generated only for 8 -10 sunshine hours  -there are always a mismatch between the Solar power generated and the load requirements of any site.  Net metering is one of the best and mos efficient schemes to ensure that all solar power generated is used by either by user or exported to the Grid to be used by other users of the ESCOM - if net metering is allowed by the escom for the commercial or industrial user. Some of the Escoms do not allow net metering for such users , instead offering Gross metering scheme- where all power generated by the user is fed to the grid and usually compensated at a low rate by the ESCOM, while the power used by the consumer are charged at the regular tarif based on the levels of usage.  Where the size of the Solar plant is smaller relative to the total power needs of the facility - A captive Solar power plant can be sized where all power generated by the Solar plant can be used inside the facility itself , with no export of power at any time. The different between captive power plant and off-grid is that the captive plant is grid paralleled and will operate only with grid or with another source like DG , and cannot be stand alone source like Off- Grid Solar power plant. Some of the additional factors that can make Gross metering or Captive plants more attractive is if Solar plant can be combined with energy storage to store excess energy for later use or to replace DG for some situations, or parallel with DGs during power outage to reduce the diesel consumption 

Duration of the plant 

If consumers own the facility then they can benefit from the Solar plant for 25 years , whereas if they are in rented premises - then they should plan to be in the same location for at least 10 years or maybe even longer depending on their tarif , to get the basic payback benefits from Solar power plant. Rented users also need to get the owners permission to enable a Solar Roof Top - on grid power plant with the ESCOM approvals. 

Loans and Tax benefits

If the consumer is looking at loans - the Solar roof top power plants are covered under various green energy and priority lending sectors by Banks and other financial institutions. The consumer can configure their loan EMI to offset their monthly electricity bill payments.  The Solar roof top power plants are covered under priority sectors as per Reserve Bank norms - which allows the investment in these plants to be claimed under Accelerated Depreciation scheme - where up to 40% of the  residual plant value each year can be claimed as tax exempt value - against the company's book profits. If the consumer is unable to take benefit of the AD benefits - then they can look at leasing the Solar power plant from investors , who can avail the AD tax benefits - although this benefit may be allowed only for gross metering and captive plants , since some escoms do not allow this leasing for net -metering. 

Payback for the Solar power plant 

In todays electricity tarif  and power cost scenarios- Commercial users pay the highest tariff, followed by Apartment common areas at the higher slab , with Industrial users coming third. If the user has high DG usage then the cost of DG power is about 4- 6 times of grid power. So depending on the type of metering, tarif paid by user and the eligible tax benefits  the investment in Solar power plant at todays rates can be recovered in 3-4 years in the best case ( Commercial users with high tarif, eligible for net metering and who can avail AD benefits) or about 7-8 years in the worst case( Industrial users without net metering facility) . As discussed earlier -if the users can tap energy storage , reduce DG usage  they can expedite the payback from the Solar plant.  After payback the user can enjoy the output from the Solar power plant for the rest of the lifetime of the plant.  Some of the risk factors to be considered for the Solar power plant economics - would be policy changes from ESCOMs in future affecting exports,  excessive power outages , availability of cheaper open source power in the market via wheeling and other schemes. 

Off grid Solar power Systems 

Next we look at Off Grid Solar power systems for Commercial , industrial and other suitable installations ( Apt common areas, Telecom towers, temporary events and portable power trucks )

While the tariff considerations , duration requirements and tax benefits would be same as On-grid - since Off Grid is primarily independent of the grid power supply - one of the biggest factors favoring Off-Grid plants is it usually requires no approvals from Escoms and hence it is much easier to plan and install. Off Grid could be the right choice when power supply is intermittent, power cost from Grid or other source like DG is very high,  loads are lighter loads like home appliances, computers, small motors ( not large motors, heating units). Off Grid also well suited for remote sites, islands or sites where utility Escom connections are difficult to get due to  distance or terrain issues. Off Grid installations could also serve stand alone EV charging stations, Temporary power stations for events or disaster management, Telecom towers, boats and mobile truck based units. In terms of technology of the off grid power plants - Maximum Power Point Tracking MPPT inverters are the most efficient systems recommended for Off Grid systems , rather than the Pulse Width Modulation PWM Inverters, which are much less efficient.

Before stepping into economics of the Off -Grid power systems - we need to acknowledge couple of factors  that Off Grid power systems need to have Energy storage systems and unlike On-Grid power systems - there will be wastage of Solar power some times in Off Grid when the the demand is low and the energy storage is already full - so these factors make Off grid power systems more expensive for the power they generate and provide. Off Grid power systems can be expected to provide 2.5 to 3 kw-hr per installed kwp of Solar pv panel capacity if the systems are sized with the right energy storage capacity and the usage of power is stable and reasonably uniform pattern. However in situations where there is very intermittent or no power, or expensive temporary power from DGs or other sources - Solar Off Grid power can be very reliable decentralized source of clean power that can truly be a stand alone power source without any external inputs like fuel or long distance cables.  Off Grid Solar power can be also very useful in facilities with high utility power cost - where some of the light loads on separate feeders can be catered by off grid power systems which use Solar power fist and then can switch over to Escom power once Solar power is exhausted. 

While the payback of Solar off grid power system can be achieved in about 6-7 years or sooner depending on the benefits, Off Grid solar power systems do need changes to batteries at end of the battery life - about 5-7 years for Lead acid batteries or 10-12 years for Lithium Ion Batteries. So the energy storage upgrade costs needs to be factored in the life cycle of the Off -Grid Solar power systems. 

In conclusion - for the right kind of users and application-  On-Grid Solar power plant or Off-grid Solar power plant can be a very worthwhile investment with assured payback and Return on Investments , in addition to adopting Green Energy as a sustainable long term solution.