Is Solar Electricity Expensive?
For a moment, let us ignore global warming and pollution, as we always do. We can always complain that somebody else is responsible for that. Now, we are left with the most important question: How expensive is the solar electricity? What is the return of investment?
The calculation of expense is no rocket science. First, you need to determine how much power you want to generate/use through Solar panels. As I mentioned earlier, solar panels cost us Rs.150/watt in retail. You can get a better deal if you go in bulk. Some applications need battery, inverter and/or special lights/fans. The math is easy and I will come to that in a later post. But first, let us talk about the ROI. The simple answer is: it depends on the application. Here are some scenarios I can think of:
1. Setting up a power plant (say 1MW) and feeding the grid: In this case, government will buy power from you. I have second hand information that they buy it at a rate of Rs.16/kilowatt in Karnataka. Setting up this power plant will cost Rs.22crores. This would roughly generate Rs.3.5 crores of revenue per year after discounting maintenance expenses. That is solid 16% return year over year for next 20 years. Or, you will get the investment back in around 6 years. Some people claim that it could be as good as 4 years (or 25% returns every year).
2. Replace the Diesel power generator with Solar generator: A good diesel generator produces 2.5KWh per 1 liter of fuel (say cost of Rs.50). That means, Rs.20 per KWh (BTW, 1KWh is what we typically refer as 1 unit in our electricity bill). The solar generator to produce equivalent amount of energy per day would cost around Rs.1.2lakhs. Your savings are Rs.15K/year. That is 12.5% returns or you can get the investment back in 8 years
3. Let your house run on Solar power in a city without many power cuts: Following similar calculations, it will take 18-20 years before you recover the investment. Not a good investment. We only pay Rs.5/unit in most of the places in India.
4. A house without electricity (poor people’s house in a remote villege or a remote farm house): With Rs.10K, you can have 3-4 lights. Additional Rs.25K – you have fan running whole night. It will take another Rs.40K to support a color TV for 4-5 hours a day. The value: Priceless. The same applies to a hawker replacing a kerosene/gas lantern with Solar Lantern.
On category 4, there is a catch. Most of the people who fall into this category are either ultra-poor and/or completely ignorant of Solar Power.
Most of you, reading this post (including myself), are probably in category 3. In cities, you may not want to go for complete Solarization of our houses from the economic perspective, unless you are a die hard green energy fan.
Option 1 is for big guys, unless, at a later point of time, someone comes up with a ‘shared’ project (eg. 1000 people can invest Rs.2.5lakhs each). They can get 16% returns consistently. This is less riskier than stock market investing and better returns than bank interest (but, don’t compare apple-to-apple with bank interest)
Option 2 is generally for businesses/companies/factories etc. Next time, when you see somebody using Diesel generator, you know that there is a better option (considering the pollution and the noise).
Now, you know why people in developed countries didn’t go for Solar Electricity for such a long time- ‘they don’t have power cuts’. Again, why didn’t the people in poor countries go for it? They don’t have money and/or awareness.
Sorry for too many numbers in this post. But, it is hard to explain money without numbers ☺. Luckily, we have other options. The world is changing. The time has come. There are small ‘entry points’ for common people like us. Let us discuss them in next post.
Author of this article is Raghavendra Ijjada, who is experimenting with Solar Energy. See the first post of this series for more info. In the mean while if any of you are looking to author a guest post here on a topic that interests you, feel free to contact me 🙂