Here is How Much Businesses are Saving from Installing Solar
The investment can be recovered in 5 years on average
The benefits to businesses from adopting solar are so overwhelming that it defies logic for any entity to be in doubt about it. The saving alone can be as high as 30% of the power costs. The recovery of the investment can take a maximum of eight years but usually hovers around five years in most cases.
After the investment is recovered, the solar installations will yield benefits for nearly two decades more – free of cost.
Fig: For a 100 kW rooftop solar installation assuming an average generation of 1,400 units per kW and 160,000 units per year. Retail tariff is considered as ₹7.2 (~$0.09)/kWh, with an increase of 4% each year until the 25th year.
Mercom India analyzed some of the projects executed by a prominent developer across the country for a varied clientele which includes a large textile company and a small spices company. However, the extent of savings on a solar system makes perfect business sense for different types of businesses operating in various geographies.
A large textile company
The company had been incurring ₹37.5 million (~$452,013) per month in energy costs with a grid tariff at about ₹7.5 (~$0.09)/kWh. It decided to install 16.85 MW of solar capacity, split between rooftop and ground-mounted systems.
The company immediately started saving nearly 35% on power costs amounting to nearly ₹13 million (~$156,693) per month.
Given that the capital expenditure for a 1 MW rooftop solar installation is roughly ₹40 million (~$482,047), the company is estimated to have spent ₹674 million (~$8 million) on the infrastructure.
The upside is that it could recover the entire investment in a little over four years based on its monthly savings.
In other details, the annual power requirement for the company is 60-70 million units (kWh), including a seasonal spike in demand.
With rooftop solar installations, the textile company started producing 56,000 units per day, which helped it substitute nearly 20 million units of grid power with solar energy annually. This accounts for nearly a third of its energy needs.
For the installation of the solar systems, the company made available 35,000 square feet of rooftop area and 28 acres for ground-mounted systems.
This enabled the developers to install 4.45 MW rooftop solar and 12.4 MW capacity as on-site ground-mounted installation.
A small manufacturer and supplier of spices
The Pune-based company has an annual requirement of 280,000 units which costs ₹150,000 (~$1,811) per month in energy bills at a tariff of ₹6.4 (~$0.08)/kWh.
The company adopted a 65 kW onsite rooftop solar installation to generate 90,000 units per year, thus replacing about 32% of the energy demand being procured from the grid earlier.
The saving on each solar unit generated was nearly 30%.
The investment in a 65 kW plant is estimated to be around ₹2.6 million (~$31,400). The annual solar energy generation saves the company nearly ₹576,000 (~$6,956) a year, and the investment recovery period is just 4.5 years.
Additionally, the business could also claim accelerated depreciation benefits of ₹640,000 (~$7,729) in three years. It allows the owner to declare a portion of installation costs as expenses that help save taxes.
A cotton ginning company
The Madhya Pradesh-based business has an annual power requirement of 1.08 million units with flat demand and a monthly average energy bill of over ₹400,000 (~$4,830) before deploying the solar system.
The firm installed a 250 kW on-site rooftop which started generating 360,000 units per year.
The saving was close to 30% on each solar unit generated. The cost of power for a manufacturing industry is typically 30%, which means a rooftop solar system can immediately start making a positive difference in a manufacturer’s earnings.
The cost of the installation is about ₹10 million (~$120,770), and the energy savings are estimated to be about ₹1.6 million (~$19,323) annually. The recovery of investment would take just over six years.
The savings from the rooftop solar system easily pay for the monthly installments on loans secured for installations. This allows businesses to pay for the asset without incurring any additional expenses from before the installation.
Moreover, the solar system is effectively free for the owners after four-eight years of loan payment.
Mercom India holds regular C&I Clean Energy Meets at prominent industrial centers across the country to raise awareness about the benefits of going solar for businesses, especially the MSMEs. To attend, write to us at email@example.com.