What is the solar feasibility in Uttar Pradesh?

​Uttar Pradesh is situated in the northern part of India and is famous for Taj Mahal, river Ganges, Bara Imambara, delicious cuisine, and may more. It is the 4th largest state by area and is naturally gifted with ​​the good amount of solar radiations. The scope of the solar power is validated by the knowing the solar feasibility in the state.

Facts & Figures

• Capital: Lucknow
• Area: 2,43,286 square Km
• Coordinates: 26.8500° N,  80.9100° E​

The solar radiations

How can you say that the state has the potential for the solar power? The best way to know this is by looking at the solar radiations within the state in the 12 months of the year. The solar insolation is the amount of the solar radiations falling on the per unit area in per unit time. The more are the radiations falling the better is the solar potential.

​Let us look at the solar radiations chart of the state for the 12 months of the year:

The average of the 12 months is 5.27 KW/m²/day or the average of 5.27 sun hours in a day with the highest month being the month of April (6.96 KW/m²/day) and the lowest is the January (3.9 KW/m²/day)
I discussed in many articles that the solar radiations play a vital role in the system feasibility. The higher amount of the solar radiations reduces the size of the solar panels hence facilitate the feasibility of the solar system while the lower amount of the solar radiations in an area negatively affect the feasibility of the system. By looking at the above chart, I can say that Uttar Pradesh is quite rich in its solar energy resource and it should harness the solar power in the form of the solar electricity.

The Grid electricity

The UPPCL is the state electricity company which transmits and distributes the electricity in the state.  This company is further sub-divided into the following divisions:

• Purvanchal Vidyut Vitaran Nigam Limited (PUVNL) (Varanasi Zone)
• Paschimanchal Vidyut Vitaran Nigam Limited (PVVNL) (Meerut Zone)
• Madhyanchal Vidyut Vitaran Nigam Limited (MVVNL) (Lucknow Zone)
• Dakshinanchal Vidyut Vitaran Nigam Limited (DVVNL) (Agra Zone)
• Kanpur Electricity Supply Company (KESCO)
• Lucknow Electricity Supply Administration (LESA)
• Uttar Pradesh Power Transmission Limited (UPPTL)

It is very important to know the electricity rates within the state in order to analyze and evaluate the feasibility of the solar power in comparison with the grid electricity rates.

The average electricity slab for the state is as follows:

For example, the monthly consumption of a household is 300 units. The monthly electricity bill can be calculated as follows:

(4.4 x 150) + (4.95 x 150) 
= 660 + 742.5 
= Rs. 1402.5 + Fixed charges say 0.45 of 400 units

The average unit price for consuming 300 units of the electricity in a month is INR 4.675 per unit (excluding the fixed charges).

The above per unit cost will act as the base point for determining the feasibility of the residential solar power system as follows:

• If the per unit cost of producing 300 units every month from the solar electricity < INR 4.675 per unit (grid rate) then the solar system is feasible otherwise it is not.

The size & the cost of the solar system generating 300 units every month

• The 2 KW solar system (with 15% efficiency) in Uttar Pradesh with average solar insolation of KW/m²/day is capable of generating 300 electricity units every month.

• The average cost of the 2 KW residential solar power system (without battery backup) in India is around INR 1,70,000.
• The life of the solar panels is assumed to be 25 years.

Now, we have to see whether this 2 KW solar power system is able to beat the grid electricity per unit price (INR 4.675 per unit) and produce solar electricity at the cheaper rate.

​If this happens then your solar power system is feasible and you should go ahead and install it on your rooftop.

Review the energy chart of the system

​The above chart shows the energy produced by the 2 KW system in the different months of the year.

For example, your daily energy requirement is 5175 W-hr (representing by the straight blue line in the chart), assuming constant throughout the year.

​You can see that in some months, the energy produced by the 2 kW solar system is more than the required energy, while in other months there is a shortage of the energy. The excess energy producing months are:

Excess Energy months:

• March
• April
• May
• June
• October

Deficit Energy months:

• January
• February
• July
• August
• September
• November
• December​

Forming the Debt-Equity structure

The setting up of the solar power system on your rooftop is a kind of an investment which requires the capital.

The cost of setting the system is INR 1,70,000 when you invest your own money without taking a loan from the financial institution.

But sometimes, it may not be possible to invest the whole amount right away by yourself and you look for the facility who can invest the amount on your behalf by offering you repay it in the small, regular and the equal installments.

When you take a loan to purchase the system, the overall cost of the system increases because of the addition of the interest in the loan amount.  

The more is the proportion of the loan or the debt, the higher is the overall cost of the system.

The benefit of availing loan is that it offers you the facility to repay in the installments over a period of time.

The Debt-equity structure plays an important role in evaluating the financial feasibility of the system.

The right mix of debt-equity can be formed considering individual’s budget.

I will discuss the three scenarios here in this post and these are as follows:

• When you fund 100% of the project by yourself that is 100% equity
• You prefer to fund 50% of the project by yourself and take loan for the remaining 50% (A case of 50% equity and 50% Debt)
• You take 100% loan from the financial institution (100% debt)

Before moving ahead, please look at the following facts & the assumptions which are made evaluating the three cases are:

• The per unit rate of grid electricity: Rs. 4.675/unit (as calculated above)
• The expected increase in the grid rate per year: 5%
• The yearly maintenance cost of the system: 0.5% of the cost of the system with 10% rise every year
• The rate of interest on the loan: 11% (Here I would like to mention that Oorjan (www.oorjan.com) provides a loan facility for setting residential solar power systems. It has tied with the banks like IDBI and SIDBI, providing the financing facility)
• Duration of the loan: 7 years
• Inflation rate: 7%     
  

  ​
Case-I: 100% Equity

When I consider installing solar power system by my own funds, it is the simple case of 100% equity funding.

As the debt part is the zero, there is no interest component attached. The overall cost of the system will be INR 1,70,000 + the yearly maintenance for the next 25 years.

The financial metrics will be as follows:

• Internal Rate of Return: The IRR helps in determining the profitability of the system. The project will provide you the annualized return of 12.17%.
• The system will cover the cost in 9.89 years. In other words, the payback period of the system is 9.89 years.
  

​Please see the chart below:

• The cost of the solar electricity is INR (2.25 - 3.00) per unit. Please see the probability distribution chart below:

​You can see that the cost of solar electricity < the cost of the grid electricity (INR 4.675 per unit), the system is feasible.

Case-II: 50% Equity & 50% Debt:
​
When you plan to invest only 50% of the total cost of the system and take the loan, for 7 years @ 11% per year, for the remaining 50% of the amount, the financials are as follows:

• IRR: 10.36%
• Payback: 12.61 years

• The cost of the solar electricity is INR (2.96 - 3.95) per unit

• The cost of the solar electricity is INR (2.96 - 3.95) per unit.

In this case, also the solar electricity is cheaper than the grid electricity, hence installing the solar system is feasible.

Case-III: 100% Debt:
​
Here you prefer 100% funding of the project, for 7 years @ 11% per year, from the financial institution. The financial metrics will be as follows:

• IRR: 8.45 %
• Payback: 15.07 years

• The cost of the solar electricity is INR (3.67 - 4.9) per unit

​In this case, the area covered with red color indicates that solar electricity is getting costlier than the Grid electricity of INR 4.675.

But this area is very less compared to the total area implies that the probability of solar electricity getting costlier is very less.

So, under special circumstances, we can say that the solar electricity is feasible and one can install the solar system.

Conclusion

It is found that with the addition and the increase in the debt, the return from the project decreases, increasing the payback period and increasing the per unit cost of the solar electricity.

Please look at the following comparison table:

In our case, all the three scenarios are favorable for the solar electricity.

The increasing rate of interest and the duration of the loan negatively affects the feasibility of the solar electricity.

​The selection of energy efficient devices and the right debt-equity mix, helps in improving the efficiency of the system and the facilitate its feasibility.

Related Articles:

• Glance to the solar radiations of the Indian states
  
• 9 killer benefits of adopting solar in your business
  
• How to beat the rising electricity prices?