Case Study: Detailed financial analysis for a residential home owner

This case study is an actual detailed financial analysis for a residential home owner who has recently installed a 6kW On-Grid Solar Plant.

Introduction

Cost is one of the most important parameter which influences the decision of a residential home owner that whether he will go solar or not.

This cost factor basically includes these key aspects:

• The total upfront cost (with and without subsidy)
• Total savings (over a period of 25 years) and
• Payback period and
• Internal rate of return (IRR)

Through this case study we demonstrate the above factors for a residential home owner in Gujarat. Gujarat has an active residential market with amazing policy support offered by nodal agencies. Morever for this entire study, we have used TSL design studio for

• Creating the 3D model of the site
• Shading analysis
• Generation simulation and
• Financial analysis

Methodology Followed

Collecting the site information

• After the preliminary site data collection, TSL was used to perform the designing part.

Making 2D and 3D layout

First the 2-D layout was created with precise mapping of the obstructions present on the roof.

After 2D mapping, panels were placed on the shade free area on the roof.

Panel Placement

A total number of 18 panels were placed with appropriate orientation and tilt.

Shadow Analysis

Shadow analysis was done to make sure that all the panels are shade free. From the shadow analysis report for December 22 from 9 AM to 5 PM, we can observe that the panels are shade free for 99.87% of solar time throughout the year.

Shadow patterns on 21st June from 6 AM to 6 PM is also shown below.

Selection of system make

After finalizing on the design part, systems make were selected. These included:

1. Modules – Adani Solar 5BB Multi-crystalline 335 18 No.
2. Inverter – Microtek GT5KW 1 No.
3. Monting structure – Premium

Report generation and analysis

Finally the financial reports were generated and the further analysis was done.

Energy generation estimates

Detailed Financial Analysis

The financial report generated from TSL clearly highlights these parameters:

1. Cost per kW
2. Total Savings
3. Payback Period
4. Internal Rate of return

Now the total upfront cost to the user is significantly affected by, whether he has availed any subsidy or not.

The image below shows the subsidy rates provided by the Centre and state to residential home owners in the state of Gujarat

Financial Analysis without subsidy

Financial Analysis with subsidy

Comparison table for various costs with and without subsidy for a 6kW installed capacity

Factors which mainly affect the above numbers are

• The cost of BOS: This includes the cost of systems used in the plant such as panels, inverters, wires, ACDB and DCDB, lightning resistors, mount type etc. These cost vary with the system make and size.
• The size of installation: Larger will be the size of installation, lesser will be the per kW cost.
• Site location: This is an important parameter since the BOS varies from place to place. Th per kW cost in Gujarat will not be same as per kW cost in West Bengal.
• The total upfront incentives available at the time of installation: This we have shown in the above estimations. Upfront incentives significantly influences the total cost and Payback period numbers

Conclusion

Generally the residential home owners have a stigma that they have to spend a hefty amount if they decide to choose solar for meeting their electricity demands. Mostly they are unaware of the various subsidies on offer by both the Centre and State Nodal Agencies (SNA’s). These subsidies can significantly reduce the total upfront cost and bring down the payback period.

From the above study we can see that, for a 6 kW of installed capacity in Gujarat, the subsidy amounting to ₹ 79,211 has brought down the payback period by 12 months. Also, since the payback period has been reduced the internal rate of return (IRR) value has increased by 10.47%.

To know more in detail about the financial terms used above, click here