Our earlier post on rooftop solar in Delhi was very popular and we got many inquiries from residents of NOIDA and other parts of the NCR whether the post was applicable to them too. Since electricity is a state subject, the solar policies vary from one state to another. This post talks about the solar economics specific to Uttar Pradesh.
Rooftop solar is a great way to invest your money – as this article will show, if you hav shadow free roof space, you can install a solar power plant, save money on your electricity bill and thereby earn handsome returns on your investment.
UP Electricity Distribution Companies (DISCOMs)
UP has one private and five publicly owned DISCOMs:
- Dakshinanchal Vidyut Vitaran Nigam Limited (DVVNL) covers Agra, Mathura, Firozabad, Mainpuri, Aligarh, Etah, Hathras, Kasganj, Jhansi, Lalitpur, Jalaun, Kanpur, Kapur Dehat, Farrukhabad, Kannauj, Etawah, Auraiya, Banda, Chitrakoot, Hamirpur and Mahoba districts
- Kanpur Electricity Supply Company (KESCO) covers Kanpur City (urban)
- Madhyanchal Vidyut Vitaran Nigam Limited (MVVNL) covers Budaun, Bareilly, Pilibhit, Shahjahanpur, Lakhimpur, Hardoi, Sitapur, Unnao, Bahraich, Shrawasti, Balrampur, Gonda, Barabanki, Rae Bareli, Faizabad, Sultanpur, Ambedkarnagar, Lucknow and Amethi districts
- Purvanchal Vidyut Vitaran Nigam Limited (PUVVNL) covers Varanasi, Ghazipur, Chandauli, Jaunpur, Sant Ravidas Nagar (Bhadohi), Mirzapur, Sonbhadra, Mau, Azamgarh, Ballia, Deoria, Kushinagar, Gorakhpur, Maharajganj, Sant Kabir Nagar, Basti, Siddharthnagar, Allahabad, Pratapgarh, Fatehpur and Kaushambi districts.
- Pashchimanchal Vidyut Vitaran Nigam Limited (PVVNL) covers Meerut, Baghpat, Ghaziabad, Hapur, Gautam Budh Nagar, Bulandshahar, Muzaffarnagar, Saharanpur, Bijnor, Moradabad, Amroha and Rampur districts
- NOIDA Power Company Limited (NPCL)
If you are in the NCR, you are likely being served by either PVVNL or NPCL.
Salient features of UP rooftop solar policy
The Uttar Pradesh Solar Policy is common across the six DISCOMs. The highlights are:
- 25 year Power Purchase Agreement (PPA)
- Rooftop solar size limited to 100% of connected (sanctioned) load or contract demand, with an upper limit of 5 kW for 1-phase connections, 50 kW for 415V connections and 1 MW for 11 kV connections.
- Choice between net metering and gross metering
- For gross metering, the consumer continues to pay his electricity bill as usual while all the generated solar power is purchased at a rate of ₹ 7.06 which is fixed over the PPA term.
- For net metering, the generated units are subtracted from the consumed units and the consumer has to pay the bill for the net units consumed. If more power is generated by the rooftop plant than consumed, then the consumer gets a zero bill and the excess power is carried forward to the next billing cycle. At the end of the financial year, if there is still a surplus then the DISCOM would pay the customer ₹ 0.50 per excess unit.
Net Metering or Gross Metering?
Except for domestic consumers, most other categories pay a higher electricity tariff than the gross metering rate specified. It thus makes sense to opt for net metering for such users. For domestic users too, we recommend that you opt for net metering since there is a good chance that inflation over 25 years will make your electricity tariff higher than ₹ 7.06 per unit.
In net metering, your effective earning per unit of generated solar power is the amount you would have otherwise paid for purchasing that unit from the DISCOM. Beyond your consumption, the earning reduces drastically to ₹ 0.50. Therefore, sizing the solar plant to generate only as much electricity as you consume is a prudent strategy. Use our estimator to understand the right size for your needs, how much it would cost and how much rooftop space it would occupy.
If by chance, you happen to have an electricity connection that has a high sanctioned load but relatively low electricity consumption, then you could look into the economics of gross metering.
Sample Returns Calculation – Net Metering
If your average monthly electricity usage is 1500 units, a rooftop solar plant of 12 kWp will offset all your consumption and bring your bill to zero. The capital needed for a system of this size is ₹7.3 lakh. The below table shows the savings calculation for different categories of urban customers:
|Other metered domestic consumers
|Other metered non-domestic consumers
|Small and Medium Power
|Monthly savings on electricity bill energy charges¹||₹ 9,856||₹ 13,063||₹ 13,427||₹ 12,128|
|Simple annual Return on Investment (ROI)||16.2%||21.5%||22.1%||19.9%|
|Loan down payment²||₹ 1,09,500||₹ 1,46,000||₹ 1,46,000||₹ 1,46,000|
|EMI²||₹ 10,641||₹ 10,015||₹ 10,015||₹ 10,015|
¹ Rates taken from NPCL electricity tariffs applicable from 10th Aug 2016. Includes Regulatory Surcharge @8%, Electricity Duty @5% for domestic, 7.5% for others.
² Loan calculated at 7 years, 11.05%. Terms and conditions
For domestic users, the EMI is only slightly more than what your electricity bill used to be before installing solar. For all other consumers, the EMI is less than your savings in electricity bill. The electricity bill after installing solar is zero, thus giving you a net monthly benefit.
- Going in for net metering hedges or shields you from future tariff increases. which have been in the range of 5-10% a year in the past few years. You can add this rate to the above ROI.
- Non-domestic consumers can further take advantage of accelerated depreciation (AD) benefits
- Business owners can expense out the interest part of the loan EMI.
- While the loan in the examples above is fully paid off in 7 years, the useful life of photovoltaic systems is 25 years. You effectively get free electricity from year 8 to 25!
The above make a compelling financial case even more lucrative. To be conservative, we can assume the following:
- Panel output degradation of 1% per year
- Maintenance / wear and tear budget of ₹900 per month with inflation at 3% per year
- Zero salvage value at the end of the PPA
The net effect of the above allowances would decrease effective returns by ~2.5% per year. The overall net metering ROI for domestic consumers considering a 5% electricity tariff inflation remains extremely attractive, at ~19% per year.
Sample Returns Calculation – Gross Metering
The earnings from selling 1500 units at ₹ 7.06 a unit are ₹ 10,590 a month. This gives a simple ROI of 17.4%, which is quite attractive. Considering the allowances mentioned above, the returns at ~15% over 25 years beat all other long-term investment options.
Starting from system design all the way to commissioning, Oorjan can give a turnkey solution for you to go solar. If you are low on liquidity, Oorjan can also help you with bank financing.
Contact us today to get started on rooftop solar in Uttar Pradesh!