2021-04-08 / HFE Team
Economics of a Rooftop Solar Power Plant
The world's transition to a fully sustainable energy system could be possible by 2050, meeting the 1.5 degrees Celsius Paris global warming target, reports WEF. This is a welcome sign, especially when pollution, largely from fossil fuel emissions, kills millions of people (8 million alone in 2018) worldwide annually.
Thankfully, countries around the world are taking steps to a low-carbon future by utilizing renewable energy sources to address the growing energy demands. For example, in India, the energy demand is expected to grow by 95 per cent by 2030 (Source). To tackle this, there's a pressing need to switch to sustainable sources of energy steadily. Given the current solar power adoption and policy-level support scenario, it seems the country is already on track to reach its goal of 175 GW of installed renewable capacity by 2022, then 450 GW by 2030. (More)
When it comes to self-sufficiency in energy production, businesses can also play a pivotal role, by adopting solar power for their wide-ranging energy purposes. Also, because the fluctuating cost of electricity is one of the highest overhead costs for a large business, switching to reliable and dependable source of energy makes sense. However, the transition to solar needs calculative steps and well-planned execution.
Cost of setting up a solar power plant
When it comes to setting up a solar plant to power your energy needs, there is no one-size-fits-all solution. Things depend on the capacity you are looking for, the maximum capacity your rooftop can accommodate, and the maximum that can be installed as per the sanctioned load. You would need a professional EPC player who will :
- Assess your demand
- Provide optimized design solution geared towards your need (RCC roofs Industrial shed (Standing Seam), Industrial shed (Trapezoidal), Special roofs etc)
- Get the approvals
- Install and commission the system
- Operate and manage the system, ensuring it works up to the desired standards.
The choice of solar panels, mounting hardware, total time needed for the completion of a project, tax and concessions, and energy storage system all have their individual impact in deciding the overall cost of setting up a solar plant.
Two financial models to choose
CapEx: In CapEx, the investment is one time and is suitable when your power requirement is minimal. The payback period can vary between 4-5 years.
OpEx: In OpEx model, the payment tenure and tariff are decided by a PPA (Power Purchase Agreement), signed with a renewable energy service Company (RESCO). This model is suitable for large-scale energy needs, and the payback could vary between 10-15 years.
As a business, it's important to understand one specific metric in particular: The break-even point of installing a solar plant.
Payback refers to the time it will take to recover the initial cost of setting up a solar system on your premises. No matter the amount invested upfront, it'll pay for itself in the form of power savings over the life of the installed rooftop solar system.
For example, the typical life of a solar plant is 25-30 years. And, a decent payback period is 4-5 years. After that, the cost of electricity becomes free for the rest of 21-25 years.
Calculate energy savings (Take the first step)
As a business, if you want to be energy efficient but are unsure about the needed investment, size of the set-up, and the ROI, you can start with a solar assessment using the energy savings calculator on this page.