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What is a solar PV system and how does it work?

A photovoltaic (PV) system is a system composed of one or more solar panels combined with an inverter and other electrical and mechanical hardware that use energy from the Sun to generate electricity.

The main components of a Solar PV system are:

  • Solar Panels or Modules: Solar panels consist of a group of small cells made from semiconductor material. When the sun’s light falls on the modules, it excites the electrons, thereby creating direct current (DC).
  • Solar Inverter: The DC electricity goes into an inverter that converts it into alternating current (AC). We use AC for running our household or office or factory equipment.
  • Storage Battery (optional): The best use of solar energy is to consume it while it is being generated. If the requirement is to store this power and consume it in the non-sunny hours, then solar energy can be stored in batteries for later consumption.


Does a solar PV system produce same energy output throughout the day?

Since Solar PV works on the basis of the intensity of sunlight it gets, your solar system typically wakes up at around 6am in the morning and goes to sleep at about 6 or 7pm in the evening. The energy output increases gradually and peaks at around noon and then gradually decreases as the Sun starts setting. But since the solar energy produced integrates either with your existing electrical connection or with your batteries, the running of your electrical equipment is not impacted. Moreover, if your Solar PV system is designed well, all your electrical equipment is totally safe


What factors are important to consider when planning to go solar?

When planning to go solar, it is important to consider:

  • How much of your energy needs can you meet with solar?
  • How much can you save by going solar?.
  • Do you have enough shadow-free space (land or roof)?
  • How much do you want to invest in your solar PV system?

Every Solar PV system is customized based on your site conditions. Therefore, you need a fair assessment of your energy requirements, site conditions and the solar energy generation potential at your site which would directly impact your savings.


What is the life and reliability of a solar PV system?

Solar PV is a highly proven and reliable technology and have been in use since 1950s. A PV system that is designed, installed, and maintained well will operate for 25 years or even more than 25 years. The Inverters, which are an integral part of a Solar PV system, may need a replacement once in the 25 years lifetime of the system. Moreover, since there are no moving parts (unless you are using tracking devices to move modules tilt with the movement of the Sun), there is practically negligible wear and tear.


What are my solar buying and financing options?

There are three buying and financing options for solar:

  • Buying a Solar PV system (CAPEX Model): You purchase the Solar PV system upfront and can avail various bank loan options to finance your Solar PV system.
  • Buying only solar power (RESCO Model): A solar power developer owns the Solar PV system setup on your rooftop/ land. You only pay for the generated electricity at a pre-agreed tariff. This usually requires a long-term buying commitment and guarantees from your side and entails a lengthy credit appraisal process.
  • Equipment leasing: An equipment leasing company will lease the Solar PV system to you and will charge you a fixed monthly/ periodic fee. This also requires long term commitments and guarantees from buyers. However, equipment leasing is not widely available as of now. Click here for more information.

What is net metering?

Net metering (also known as net energy metering or NEM) is a solar incentive that allows you to store energy in the electric grid. When your solar panels produce more electricity than you need, that energy is sent to the grid in exchange for credits. Then, at night or other times when your solar panels are underproducing, you pull energy from the grid and use these credits to offset the costs of that energy.


How much does a Solar PV system cost?

Solar PV system costs vary depending on the size of the system. An on-grid system of a size up to 10kWp costs Rs. 44-70/Wp, between 10 – 100 kWp costs Rs. 34-50/Wp and above 100KWp costs Rs. 34-36/Wp systems.

For utility-scale solar projects, costs can be even lower than Rs. 30/Wp. However, for off-grid systems with battery backup cost goes up significantly and lies between Rs.100 -125/ Wp.

To Determine the system size and cost most relevant to you, run the solar calculator now!


Is solar power cheaper than grid power?

Yes, solar power today is cheaper that grid power for a lot of consumer categories across most states. Moreover, solar is a one time investment while grid tariff keeps increasing every year. Therefore, by choosing to go solar today, you are locking in a fixed energy price for the next 25 years.Illustration for an average residential customer in Rajasthan.

A 2kW Solar PV system costs around Rs 1 lacs and has a life of at least 25 years with low recurring costs. This translates to a per unit levellized cost of Rs7 – 8 /kWh for the next 25 years.

Lets compare this with the cost of grid power. The discom charges him slab-wise but on an average he pays Rs 7.3/kWh. And this price keeps increasing by about 5% per annum, which means you may be paying Rs 24.7/kWh at the end of 25 years. This translates to a per unit levellized cost of approx. Rs 10 – 11/kWh when compared with the 25 year life of Solar PV system.


What are the other fiscal incentives are available for solar rooftop systems?

There are provisions of concessional import duty/excise duty exemption, accelerated depreciation and tax holiday for setting up of grid connected rooftop power plants.


What efforts Government is making to providing loans for solar rooftop systems?

Department of Financial services has instructed to all Public Sector Banks to encourage home loan/ home improvement loan seekers to install rooftop solar PV plants and include cost of system in their home loan proposals. So far, nine PSBs namely Bank of India, Syndicate Bank, State Bank of India, Dena Bank , Central Bank of India, Punjab National Bank, Allahabad Bank, Indian Bank and Indian Overseas Bank have given instructions to extend loan for Grid Interactive Rooftop Solar PV Plants as home loan/ home improvement loan


What is the return on investment (ROI) and payback period of solar PV?

Payback period for your solar PV system stands for the amount of time it takes for your initial investment in the system to be recovered from the savings it leads to and Return on Investment (ROI) refers to the effective returns that your investment would generate. The higher your monthly savings, the quicker your initial investment would be repaid and the higher your ROI would be. Typically, commercial & industrial consumers should expect payback in 3 – 5 years and residential consumers should expect payback in 5- 7 years. Once the initial cost of your system is paid back, the energy generated by it for the next 18 – 22 years is almost free of cost.

Megawatt plant

Cost of project ₹ 3,50,00,000.00

Total Installment ₹ 70,00,000.00


5 Years

Payback 3 YEARS 8 MONTHS

IRR 19%

1 3,50,00,000.00 70,00,000.00 2,80,00,000.00 35,00,000.00
2 2,80,00,000.00 70,00,000.00 2,10,00,000.00 28,00,000.00
3 2,10,00,000.00 70,00,000.00 1,40,00,000.00 21,00,000.00
4 1,40,00,000.00 70,00,000.00 70,00,000.00 14,00,000.00
5 70,00,000.00 70,00,000.00 0.00 7,00,000.00
  Total 3,50,00,000.00   1,05,00,000.00
Depriciation Chart
1 3,50,00,000.00 70,00,000.00
2 3,50,00,000.00 70,00,000.00
3 3,50,00,000.00 70,00,000.00
4 3,50,00,000.00 70,00,000.00
5 3,50,00,000.00 70,00,000.00
Additional Gain   3,50,00,000.00
1 3,50,00,000.00 35,00,000.00 70,00,000.00 1,05,00,000.00 1500000 7.93 1,18,95,000 - ₹ 2,66,05,000.00 13,95,000.00
2 2,66,05,000.00 28,00,000.00 70,00,000.00 98,00,000.00 1462500 7.93 1,15,97,625 - ₹ 1,78,07,375.00 17,97,625.00
3 1,78,07,375.00 21,00,000.00 70,00,000.00 91,00,000.00 1452263 7.93 1,15,16,442 - ₹ 83,90,933.38 24,16,441.63
4 83,90,933.38 14,00,000.00 70,00,000.00 84,00,000.00 1442097 7.93 1,14,35,827 16,44,893.16 30,35,826.53
5   7,00,000.00 70,00,000.00 77,00,000.00 1432002 7.93 1,13,55,776 1,06,55,775.75 36,55,775.75
  Total 1,05,00,000.00 3,50,00,000.00 4,55,00,000.00 7288861   5,78,00,668.91 1,23,00,668.91 1,23,00,668.91


How much time does it take to install a solar PV system?

It takes about 2-4 weeks to install a smaller system and about 4-8 weeks for larger systems. However, the actual construction time at the site is much lower since almost half of the time is spent on off-site activities such as design, engineering, procurement, etc. In certain cases, there may be variations to these timelines on account of access to the site, rains, etc.


What factors are important to consider during Solar PV system installation?

Good solar installers follow standard procedures and quality standards. So once you’ve chosen the right installer, you don’t have to worry about supervision. However, it may be a good practice to:

  • Ask for layout drawing and bill of material.
  • Ensure that the delivered material is as per the bill of material, is damage free and is kept at a safe place.
  • Ensure that cables and wires are properly tied and clamped.


What would be the annual maintenance cost for a solar PV system?

The annual maintenance and recurring costs are almost negligible, since there are no moving parts and the input fuel (sunlight) is free. For optimum performance, the system only requires cleaning of modules and basic preventive and corrective maintenance. However, for off-grid systems where batteries are used, the maintenance costs are higher on account of battery replacement every 3-5 years. To ensure high generation and low maintenance cost, regular monitoring through data loggers is highly recommended. Typically, the maintenance costs for smaller Solar PV systems is about 2% of the initial system cost, and for larger systems is about 1% of the initial cost.


What permits & approvals do I need to install a solar PV system?

No permits would be needed, if you are going to install off grid Solar PV system or grid connected system for captive (self) consumption. For net metering and gross metering system, certain permits and approvals are required.

For Net & Gross Metering:

  • Approval from DISCOM for grid connectivity.
  • CEIG(Chief electrical inspector to the government of state) approval for the capacity more than 10 KW(This capacity may vary from state to state).


What steps should I take to buy a Solar PV system?

  • Run the GSEL Calculator and check your potential savings.
  • Register your Rooftop with GSEL
  • Get your site visit done and start receiving quotes from pre-qualified installers
  • Compare quotes and select your installer.
  • Finalize the terms (pricing, guarantees, etc.) and the order with the selected installer and start your solar journey.


Which solar PV system is suitable for me?

Depending on your energy consumption pattern (consumption during day vs night), power outage pattern, availability of policies like Net Metering and access to grid power (for rural areas), you can choose between an on-grid and an off-grid Solar PV system. On grid systems are the most commonly used systems and are the least expensive and require very little maintenance. Off-grid systems use batteries which cost significantly more and need high maintenance.


How do I know that my system is working efficiently?

To keep a regular check on your system performance, it is recommended that you install a data logger (data monitoring device) along with your Solar PV system.

This device will allow you to compare the actual with the estimated performance on a daily, monthly and annual basis.


What is the unit of electricity?

Electricity is measured in kWh (Kilo Watt Hour). It is the amount of electricity consumed by an appliance in a specified period. For example, 100W bulb * running for 1 hour = 100Wh which is equal to 0.1 kWh (unit).

Your electricity bill mentions the kWh (Units) consumed by you in your billing cycle.


What are the key factors that affect solar power generation?

To ensure that the generation from your Solar PV system is maximized, the following should be kept in mind:

  • Location (Solar Irradiation/ weather conditions).
  • Plant layout
  • Shading and roof orientation
  • System design
  • Equipment quality
  • Operations and maintenance