What is solar savings? What is ROI of using solar power?

November 18, 2019by absrenewpower

Savings with Solar power Vs conventional electricity mediums

We all know that solar installation promotes sustainability and also helps an individual economically. However, the two most common hurdles for people switching to solar is space constraint and heavy investment. However, over the years solar companies, manufacturers, and government bodies have come together to find alternatives and business models to gradually reduce these hurdles.

Multiple articles talk about solar savings but none have provided a detailed analysis on the Return on Investment (ROI). Considering the recent developments, we will answer the question to what is solar savings and also analyze the cost to benefit ratio in terms of environment and economy.

How economical is a solar installation?

With rising electricity consumption every year due to increase in technology dependency and access to power, it is not a surprise to see our annual utility bills getting expensive every year. Research states, India’s electricity consumption has grown by 55% since 2001 and more than 80% since 2017. The average consumption rate in India keeps fluctuating based on the state’s generation capacity. This is mainly to do with the weather conditions as usage of air conditioners and other high power consuming applications is more in humid regions of India. Delhi being the highest power consuming state, Mumbai monthly consumes 110 units per person based on a research.

Let’s analyze the savings with an example to understand better. Let’s consider an industrialist from Mumbai monthly consuming 36,000 units. He receives a utility bill of approximately Rs. 300,000 i.e. Rs. 3,600,000 annually including all taxes and charges. Now, if the industrialist decides to go solar, we need to understand the sanctioned load which will be mentioned in the monthly utility bill.

Based on the policies of Maharashtra state government, a user can only install a solar system with a maximum capacity of 80% of the sanctioned load. With our industrialist being sanctioned a load of 167 kW, it entitles him to set up a 133 kW solar PV system. Setting up an on-grid solar system of that capacity would require an initial investment of approximately Rs. 5,320,000. Please note that these prices may vary based on the location, brand of components selected, wattage per panel, transport, installation area, and many other factors. Since our industrialist can generate 25,000 units during the daytime and the other 11,000 after daylight, energy generated during daylight is free of cost and won’t be charged by the utility company. However, the system can only generate 17995 units during the daylight and rest 18005 units is borrowed from the grid. The industrialist will have to pay for the 18,005 units which would be charged at an average rate of Rs. 12 per unit. This means the industrialist will have to pay Rs. 216,060 monthly i.e. Rs. 2,592,720 annually.

Based on this example, the industrialist will recover his investment in solar savings within 7 years which includes the maintenance costs of the system and the inflating utility rates.

What are the environmental savings?

We all know that solar power is a clean source of energy and promotes sustainability. Based on our solar calculator, our industrialist with an annual generation of 133kWp on solar, an individual will reduce carbon emissions by 107730kg/year. This is also equivalent to 2660 tree plantations.

With both environmental and economic savings in going solar, we hope to have figuratively explained you the benefits of switching to solar with an example. Visit us next time for more knowledge sharing articles on solar savings.