Tamil Nadu continues to lead the nation in rooftop solar installation. As per the 2016 Bridge To India report, Tamil Nadu is the state with the most rooftop solar installed across Residential, Commercial and Industrial categories.
Rooftop solar is a great way to invest your money – as this article will show, if you have 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.
The Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) is the sole DISCOM for Tamil Nadu serving Ariyalur, Chennai, Coimbatore, Cuddalore, Dharmapuri, Dindigul, Erode, Kanchipuram, Kanniyakumari, Karur, Krishnagiri, Madurai, Nagapattinam, Namakkal, The Nilgiris, Perambalur, Pudukkottai, Ramanathapuram, Salem, Sivaganga, Thanjavur, Theni, Thoothukudi, Tiruchirappalli, Tirunelveli, Tiruppur, Tiruvallur, Tiruvannamalai, Tiruvarur, Vellore, Viluppuram and Virudhunagar districts. It is also commonly called TNEB, which is its parent organization.
Salient features of Tamil Nadu rooftop solar policy
Solar net metering is allowed for the following categories of electricity consumers:
|HT tariff II-A||Govt. and Govt. aided Educational Institutions and hostels, Government Hospitals, Public Lighting and Water supply, Actual places of public worship etc.|
|HT tariff III||All other categories of consumers not covered under HT-I-A, I-B, II-A, II-B, IV and V|
|LT tariff I-A||Domestic , Handloom, Old age homes, Consulting rooms, Nutritious Meals Centres etc.|
|LT tariff I-C||L.T. Bulk supply to residential Colonies of Railway, Defence , Police quarters etc.|
|LT tariff II-A||Public lighting by Govt./Local bodies, Public water supply, Sewerage etc.|
|LT tariff II-B (1)||Govt and Govt. aided Educational Institutions, Govt. Hospitals and Research labs, etc|
|LT tariff – V||Commercial|
- Rooftop solar size limited to 100% of sanctioned / contract load. (The sanctioned load is mentioned in kW on your electricity bill.) Consumers can install solar greater than sanctioned load by applying simultaneously for service connection enhancement.
- Net metering with yearly settlement: Every billing cycle, the units (kWh) generated from the solar plant are subtracted from the consumed units and the prosumer has to pay the bill for the net units consumed. If more power is generated by the rooftop plant than consumed, then the prosumer gets a zero bill and the excess units are carried forward to the next billing cycle.
- At the end of the 12-month settlement period (August to June OR September to July), the units consumed in the 12 months are summed. Solar units generated and exported to the grid are considered as commercial units up to 90% of the total yearly consumption, and are eligible for net-metering set-off calculations. Any units generated and exported beyond 90% of the consumed units are treated as lapsed or non-commercial. This means that the prosumer has to pay TNEB for a minimum of 10% of his 12-month unit consumption; there will be no benefit to the consumer for excess units generated by the rooftop solar plant beyond 90% of the total units consumed by him.
- 30% MNRE subsidy available through Tamil Nadu Energy Development Agency (TEDA)
- Additional ₹20,000 subsidy for a 1kW grid-tie rooftop plant under CM’s Solar Rooftop Capital Incentive Scheme for consumers under tariff LA-1A (Domestic)
Since the maximum commercial output of the rooftop solar plant is capped at 90% of the annual unit consumption, oversizing the rooftop solar plant does not give any financial benefit. We recommend that TN electricity consumers size their system to generate only as much as they consume over the year. This would leave a slight margin for additional electricity needs in future.
Use our convenient solar sizing calculator and quote generator to find the right plant size and costs for your need.
Sample Returns Calculation
If your average monthly electricity usage is 1000 units, a rooftop solar plant of 7.3 kWp will offset 90% of your consumption. The capital needed for a system of this size is ₹4.6 lakh before subsidy and ₹3.22 lakh after 30% MNRE subsidy. The below table shows the savings calculation on the subsidized cost for different categories of customers:
|Domestic (LT tariff I-A)||Educational Institutions (LT tariff II-B (1))||Commercial (LT tariff – V)||Commercial (HT tariff III)|
|Monthly savings on electricity bill because of solar¹||₹ 5,633||₹ 5,164||₹ 7,229||₹ 7,184|
|Simple annual Return on Investment (ROI)||21.0%||19.2%||26.9%||26.8%|
|Loan down payment²||₹ 48,290||₹ 64,386||₹ 64,386||₹ 64,386|
|EMI for solar²||(₹ 4,693)||(₹ 4,417)||(₹ 4,417)||(₹ 4,417)|
|Net monthly benefit (savings – EMI)||₹ 940||₹ 747||₹ 2,812||₹ 2,767|
¹ Rates taken from TNERC electricity tariffs effective 23rd May 2016.
² Loan calculated at 7 years, 11.05%. Terms and conditions
As you can see, the EMI is less than what your electricity bill was before installing solar. The surprising result is that if you install solar on your rooftop today, you are cashflow positive from the first month itself!
- Electricity tariffs rise over the years. These calculations do not consider the added benefit of hedging against rising electricity tariffs that net metering offers.
- 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. So 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 ₹450 per month with inflation at 3% per year
- Zero salvage value at the end of 25 years.
The net effect of the above allowances would decrease effective returns by ~2.5% per year. The returns remain extremely attractive.
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 TN!