How bad is the ROI for solar PV power in India?
KRS Murthy
The ROI term is used by many novices and experts, not understanding what it means.
My statements and analysis apply only to India, solar panel installation, current interest rates in India or the market discount rates, with or without storage, and most importantly the sunny part of India.
- Solar radiation assumption: 5 kWh to 6 kWH ( which has a 20 percent spread)
- The grid utility is NOT available all the time, with X number of hours per day with NO electricity
- The alternative is diesel, so the diesel price and generator capital expenditure amortized + operational / maintenance budget added every month or year.
- Storage is needed for (24 - 6) hours minimum and (24 - 5) hours typically.
- Rainy and cloudy days will need 24 to 48 hours minimum storage capacity, with occasional storage requirements for 72 to 120 hours
- The solar panels have to produce the total 24 to 48 hours worth of power needs of the residential or small business installations.
- Example:
- If the average daily power consumption is 1kW X 24 = 24 kW, assuming average hourly consumption of 1kWh, the total solar panel capacity should be 24 kWh divided by 6 hours = 4 kWh production every hour.
- However, the power produced is zero at sunrise and slowly increases and peaks at about noon, further going down to zero at sunset.
- Therefore, to produce a total of 24 kWh during the 5 or 6 hours of the sun, the house or business really needs the number of solar panels to produce a peak of 10 kW to 15 kW, depending on the location of the application on the globe, to maximize for the different seasons of the year.
- The total storage capacity for the batteries should be 24 kWh to 120 kWh, depending on the need for reliability and availability of power.
- Important: Need of solar panels specified by peak power at the peak usage requirements in a day over the year.
- Because of the sun's direct incident light and solar intensity varying from zero to daily peak, the solar panels need to be sized, much higher than most or all current installations.
- The example assumes hourly average of power requirement over the day and over the year of only 1kWh, proportionate multiplication is needed for all calculations.
- For example,typical 2000 sq ft home in USA needs to be specified at 3kWh and peak of 5kWh, the investment and all ROI calculation should be made by multiplying by 3 or 5.
- Total installed cost of the solar panels to deliver the peak load + invertor + controllers + cabling + storage and any control panels + installation costs should be used for ROI.
- The discount rates, based on cost of capital, are for higher in India compared to USA. Currently, Indian interest rates are very high at 12% or more. In USA, it is less than 3% or 4%. The ratio between Indian interests and rates in USA are 3 to 4 times.
- The interest rate burden is very high in India, many times making the economics of ROI very bad.
- Please note that have not used the cost of land, training, labor productivity etc. in our calculations.
- Please contact me for detailed discussions of specific business investments in solar
Dr. KRS Murthy Dr.Sri.Murthy@Gmail.Com (408)-464-3333
