Techno-Economics of Rooftop Solar Photovoltaic Systems in India

TECHNO-ECONOMICS
OF
ROOFTOP SOLAR PHOTOVOLTAIC SYSTEMS IN INDIA
A dissertation submitted in partial fulfillment of the requirement for the award of the degree
of
MASTER OF TECHNOLOGY
in
ENERGY STUDIES
Submitted by
Shailesh Mishra
(2015JES2784)
Under the guidance of
Professor Tara C. Kandpal
CENTRE FOR ENERGY STUDIES
INDIAN INSTITUTE OF TECHNOLOGY DELHI
HAUZ KHAS, NEW DELHI - 110016, INDIA
MAY 2017

i
Certificate
The work presented in this report has been carried out by me towards the partial fulfilment of
the requirements for the award of MASTER OF TECHNOLOGY in Energy Studies, Indian
Institute of Technology Delhi. The materials taken from other sources have been
acknowledged. The results presented in this work have not been submitted in part or full to
any other university for the award of degree/diploma.
Shailesh Mishra
2015JES2784
The thesis entitled, “Techno-Economics of Rooftop Solar Photovoltaic Projects in India”
submitted by Shailesh Mishra (2015JES2784) towards the partial fulfilment of the
requirements for the award of MASTER OF TECHNOLOGY in Energy Studies, Indian
Institute of Technology Delhi, is a record of the work carried out by him under my guidance
and supervision.
Dr. Tara C. Kandpal
Professor
Centre for Energy Studies
IIT Delhi – 110 016

ii
Acknowledgements
I would like to take this opportunity to express my sincere gratitude to my guide Professor
Tara C. Kandpal for his earnest support, prompt and excellent direction, everlasting
encouragement, and inspiration bestowed upon me throughout my project work. Without his
continuous support and critical analysis, the present work would not have been possible.
I am also thankful to Dr. K.A. Subramanian for his efforts in smoothing out the
administrative processes and consistent support in his capacity as M. Tech. coordinator. I am
also thankful to Prof. Viresh Dutta, the Head, Centre for Energy Studies and all other faculty
members’ of CES for their positive insights and constructive feedbacks during various
courses they taught, project evaluations and the exciting past two years.
I would also like to express my profound appreciation to Mr. Ashish Sharma, Mr. Tarun
Kumar Aseri and Mr. Saurabh Singhal for their inputs, feedbacks and reviews and all other
helping hands that were instrumental in many ways in completion of my project. My thanks
are also due to my fellow classmates for embracing me as a member of their dynamic team,
and also for their support and encouragement, without which the two years journey, and of
course the learning process would not have been as productive and enjoyable.
Finally, I would like to thank my family for their encouragement and blessings. Last but not
the least; I would like to acknowledge the tireless support, understanding, patience and
hardships faced by none other but my wife Ratnesh Mishra and our lovely kids Ajitesh and
Anika, for allowing me to carry forward my higher studies. My sincere thanks and profound
appreciation to my elder brother Tapas Gupta for his wonderful guidance and unshakable and
inspirational support, without which I would not have achieved whatever little I have done so
far. I am equally grateful to Rajneesh Pandey and the whole family members for their
generous support and painstaking efforts to take care of my wife and kids during my absence.
Finally, I remain grateful to all my friends and good-wishers, who always gave me moral
support to accomplish my goal.
Shailesh Mishra
2015JES2784

iii
Abstract
In this study, a preliminary attempt has been made to (i) assess the potential of rooftop solar
PV power generation in India and (ii) evaluate its financial feasibility. For this, rooftop PV
potential of 21 cities in India has been estimated which is further extrapolated to give the
overall potential of urban buildings in the country under residential, commercial, institutional
and industrial categories. Further, estimation of annual energy delivery and the levelized cost
of electricity produced by the rooftop PV system have been made with the help of System
Advisor Model (SAM). The value of LCOE for a 5 kW system varies from ₹ 6.47/kWh
(Jaisalmer) to ₹ 8.63/kWh (Kohima) while the same are marginally different for a 2 kW
system varying from ₹ 6.51/kWh to ₹ 8.69/kWh.
An attempt has also been made to review the electricity tariff for different categories of
consumers’ e.g. domestic, commercial, industrial and agricultural in all states /UTs and also
their policies for promoting rooftop solar PV. Net-metering provision for the implementation
of rooftop solar PV has already been notified by all states/UTs. However, only 13 states have
implemented the Feed-in Tariff (FiT) mechanism to promote rooftop solar PV systems. Eight
of these states have provision for accelerated depreciation and accordingly, the FiT is
somewhat lower. In some of the states having slab based pricing, above a certain monthly
consumption of electricity, the LCOE for rooftop solar PV is found to be lower than the grid
electricity tariff indicating the potential for rooftop solar PV systems being competitive with
grid electricity.
The values of payback period, net present value (NPV), internal rate of return (IRR),
minimum feed-in tariff (FiTmin) required to reach breakeven and the extent of incentives
required for rooftop solar PV (RTSPV) systems to be financially viable have also been
estimated. It is observed that, for all locations considered in this study, the values of LCOE
delivered by RTSPV systems are higher than that of the average power purchase cost (APPC)
of conventional fossil fuel based electricity. Support in terms of financial/fiscal incentives for
promotion of RTSPV in India is therefore recommended at this stage.

iv
Contents
Certificate ................................................................................................................................. i
Acknowledgements ................................................................................................................. ii
Abstract................................................................................................................................... iii
List of Figures........................................................................................................................ vii
List of Tables ........................................................................................................................ viii
Nomenclature ...........................................................................................................................x
Chapter 1: Introduction and Literature Review...................................................................1
1.1 Relevance and Need for Harnessing Renewable Energy ...................................................1
1.2 Solar Photovoltaic Electricity Generation in India.............................................................2
1.3 Design Details of a Typical Rooftop Solar PV System......................................................3
1.4 Literature Review...............................................................................................................5
1.4.1 Technical feasibility and challenges..........................................................................5
1.4.2 Estimation of rooftop solar PV potential...................................................................6
1.4.3 Economics and policy measures................................................................................6
1.5 Objectives of the study.......................................................................................................7
Chapter 2: Estimation of the Potential of Rooftop Solar PV in India ................................8
2.1 Factors Used for Estimating Usable Roof Area for PV Installation ..................................9
2.1.1 Shading from adjacent buildings /trees: ....................................................................9
2.1.2 Clearance between wall and PV arrays .....................................................................9
2.1.3 Space for other items (such as a solar water heating system) on the roof...............10
2.1.4 Space required by water storage tank(s)..................................................................10
2.1.5 Space required by staircase (s) ................................................................................10
2.1.6 Inter-row spacing to avoid self-shading losses and cleaning space required for
rooftop PV systems...........................................................................................................11
2.1.7 Shading losses due to railings..................................................................................11
2.2 Estimation of rooftop solar PV potential for urban settlements in India..........................15
2.3 Results and Discussion.....................................................................................................18
Chapter 3: Estimation of Levelized Cost of Electricity (LCOE) Delivered by Rooftop
Solar PV Plants at Different Locations in India .................................................................19
3.1 Estimation of Annual Energy Delivered (AED) and Levelized Cost of Electricity ........19
3.2 Sensitivity Analysis of LCOE Delivered by Rooftop Solar PV Systems ........................22

v
3.3 Review and Analysis of Rooftop Solar PV Related Policies in Different States of India
................................................................................................................................................24
Chapter 4: Financial Feasibility of Rooftop Solar PV Systems and Incentives Required
for Their Promotion...............................................................................................................27
4.1 Financial Feasibility of Rooftop Solar PV Systems.........................................................27
4.1.1 Estimates of NPV, TSP, TDP and IRR.......................................................................28
4.1.2 Minimum feed-in tariff (FiT) required for financial viability.................................29
4.2 Estimation of Required Level of Incentives for Promotion of Rooftop Solar PV Systems
...............................................................................................................................................31
4.2.1 Introduction ...................................................................................................................31
4.3 Different Types of Incentives...........................................................................................32
4.3.1 Capital subsidy and viability gap funding (VGF) ...................................................33
4.3.2 Soft loan and interest subsidy..................................................................................34
4.3.3 Accelerated depreciation .........................................................................................36
4.3.4 Carbon mitigation benefits – certified emission reduction unit ..............................38
4.3.5 Investment tax credit ...............................................................................................39
Chapter 5: Conclusions and Recommendations .................................................................41
5.1 Conclusions ......................................................................................................................41
5.2 Recommendations ............................................................................................................43
References...............................................................................................................................44
Appendices..............................................................................................................................60
Appendix – A Land use pattern and percentage share of different categories of buildings ....61
Appendix –B Extent of clearance required between wall and PV arrays................................65
Appendix –C Space required by staircase ...............................................................................66
Appendix –D Shading due to railings and minimum height from the rooftop level for
installing PV arrays..................................................................................................................67
Appendix –E Buildings with concrete roof and their percentage under different building
categories .................................................................................................................................69
Appendix –F Average number of stories for residential buildings in India ............................70
Appendix –G Average annual GHI and ambient temperature of different cities in India.......71
Appendix –H Estimates for annual energy delivered by rooftop PV and corresponding values
of LCOE...................................................................................................................................73
Appendix –I Relevant policies for promotion of rooftop solar PV in various states in India .75
Appendix –J Summary of available feed-in tariff (FiT) in various states of India..................77

vi
Appendix –K Tariff for different categories of consumers in various states...........................78

vii
List of Figures
Figure 1.1: Cumulative installed capacity of solar PV based electricity generation in India...2
Figure 1.2: Schematic Diagram of a Rooftop Solar PV system ...............................................4
Figure 2.1: Steps involved in assessing the potential of rooftop solar PV in India..................8
Figure 2.2: Schematic flow chart depicting steps involved in the estimation of rooftop solar
PV potential in India ................................................................................................................13
Figure 3.1: Methodology adopted for estimation of annual energy delivered and LCOE .....19
Figure 3.2: Feed-in tariff (FiT) with and without AD benefits in various states....................25
Figure 3.3: Feed-in tariff (FiT) in 5 states ..............................................................................26
Figure 4.1: A schematic of the approach adopted for studying the effect of incentives on
LCOE delivered by rooftop solar PV systems.........................................................................33
Figure B.1: A schematic showing rooftop and the clearance on it.........................................65

viii
List of Tables
Table 1.1: Relative strengths and limitations of ground mounted solar PV systems................3
Table 1.2: Relative strengths and limitations of rooftop Solar PV systems .............................4
Table 2.1: Estimates of shading losses due to adjacent building structures and trees ..............9
Table 2.2: Factors internalized in estimating usable roof area for PV installations ...............12
Table 2.3: Potential estimation of rooftop solar PV based on assumptions made by TERI
(2014) and variations observed during the present study ........................................................13
Table 2.4: Total occupied urban buildings, their % share of under different building
categories, and total rooftops available for solar PV implementation.....................................16
Table 2.5: Criteria assumed for deciding number of floors in a building based on population
density of cities ........................................................................................................................17
Table 3.1: Values of input parameters used in this study .......................................................21
Table 3.2: Estimates for annual energy delivered by RTSPV systems, their corresponding
LCOE and APPC of respective locations ................................................................................22
Table 3.3: Input parameters for LCOE estimation and probable reasons for variance...........23
Table 3.4: Estimates for sensitivity of LCOE to 1% change in input parameters ..................24
Table 4.1: Estimates for TSP, TDP, NPV and IRR (5 kW system)...........................................29
Table 4.2: Estimates for minimum FiT required for breakeven (i.e. FiT at which NPV=0)
when capital subsidy or lower rate of interest on capital is provided (5 kW) .........................30
Table 4.3: Estimates for the minimum value of feed-in tariff when a capital subsidy
equivalent to CO2 emission mitigation benefits, lower interest rate loan along with a capital
grant (5 kW).............................................................................................................................31
Table 4.4: Extent of VGF required for LCOE to be equal to APPC.......................................34
Table 4.5: Estimation of annual interest subsidy and equivalent cost to the government ......36
Table 4.6: Estimates for AD, CERU and ITC benefits for achieving target value of APPC..40
Table 5.1: The extent of incentives required to make rooftop PV market competitive..........42
Table A1: Land use pattern and percentage share (weighted average of 21 cities) of different
buildings...................................................................................................................................61
Table A2: Provision of ground coverage for different building categories in Building Bye-
Laws.........................................................................................................................................62
Table A3: Reported field level efficiencies of rooftop solar PV systems...............................63
Table A4: Sample cities considered for this study and their respective climatic zone...........64
Table C1: Requirements for staircase for different types of buildings...................................66

ix
Table C2: Roof area required by staircase (s) for different categories of buildings..............66
Table D1: Estimates for shadow length at different time of the day ......................................67
Table E1: Number of total occupied urban buildings (all may not have concrete roof) and
their percentage share under different building categories......................................................69
Table F1: Average number of stories for residential buildings in India.................................70
Table G1: Average annual GHI and ambient temperature of different cities in India ...........71
Table H1: Estimation of annual energy delivered and corresponding values of LCOE for
different capacity of plants at various locations ......................................................................73
Table I1: Relevant policies for promotion of rooftop solar PV in various states in India......75
Table J1: Summary of available feed-in tariff (FiT) in various states of India......................77
Table K1: State wise electricity tariff for domestic consumers..............................................78
Table K2: State wise electricity tariff for commercial consumers .........................................80
Table K3: State wise electricity tariff for Industrial consumers.............................................82

x
Nomenclature
Acronyms used in present study
ACOM Annual Operation and Maintenance Cost
AD Accelerated Depreciation
ADB Asian Development Bank
APPC Average Power Purchase Cost
BOS Balance of System
CEA Central Electricity Authority
CFA Central Financial Assistance
CERC Central Electricity Regulatory Commission
CERU Certified Emission Reduction Unit
CUF Capacity Utilization Factor
FiT Feed -in Tariff
GHG Greenhouse Gases (GHG
GHI Global Horizontal Irradiance
GW Giga Watts (1 GW =109
Watts)
IRR Internal Rate of Return
ITC Investment Tax Credit
JNNSM Jawaharlal Nehru National Solar Mission
LCOE Levelized Cost of Electricity
MWh Mega Watt hour
NPV Net Present Value
NREL National Renewable Energy Laboratory
PV Photovoltaic
RTSPV Rooftop Solar Photovoltaic
SAM System Advisor Model
SECI Solar Energy Corporation of India
TEDA Tamil Nadu Energy Development Agency
TERI The Energy and Resources Institute
VGF Viability Gap Funding
WACC Weighted Average Cost of Capital

1
Chapter 1: Introduction and Literature Review
1.1 Relevance and Need for Harnessing Renewable Energy
Global energy demand increased rapidly in the 20th
century and the same trend is continuing
in the 21st
century as well (REN21, 2016). A major share of the global energy demand has
been met with fossil fuels (REN21, 2016). The extraction, conversion, transmission
(transport), distribution and utilization of fossil fuels lead to the release of a variety of
environmental pollutants including the CO2 (IRENA, 2016a). Increased concentration of
greenhouse gases such as CO2 in the atmosphere has manifested in terms of global warming
and many other adverse environmental effects (IRENA, 2016a). Large scale harnessing of
renewable energy resources and adoption of energy efficiency and other demand-side
management measures are expected to solve this problem. A large number of countries in the
world have initiated ambitious programs in this direction and considerable success has been
achieved in both harnessing the renewable sources of energy as well as in improving the
efficiency of energy utilization. As a consequence, the energy mix is changing on the global
scale (REN21, 2016; IRENA, 2016a).
By the end of 2015, the total electricity generation from renewables accounted for almost
23.7% of global electricity production (IRENA, 2016a; REN21, 2016). In 2016, the
worldwide total installed capacity of electricity generation based on renewable sources of
energy (excluding large hydropower and pumped storage) reached 1070 GW (IRENA,
2016b). In India, the installed capacity for electricity generation based on renewable energy
resources reached 49.12 GW in 2016 (95.53 GW including large hydro and pumped storage
plants) as against a capacity of just 2.31 GW in the year 2000 (IRENA, 2016b).
Amongst the various renewable sources of energy, solar energy is expected to play a very
important role in view of its decentralized availability in most of the countries of the world.
Two distinct technological routes have so far been developed for generating electricity from
solar energy. One of the options uses solar energy to produce steam at high temperatures and
the same is then used to drive a steam turbine to produce electricity. This solar thermal power
generation route has a global installed capacity of 4.87 GW in 2016 (IRENA, 2016b) and is
still not cost competitive with the other option for electricity generation based on solar
energy. The second option is based on direct conversion of solar energy into electricity using
photovoltaic (solar) cells. There has been a substantial cost reduction in producing electricity

2
through this photovoltaic power generation route in recent years. The global photovoltaic
electricity generation capacity was reportedly 290 GW in 2016 with India having installed
capacity of 9.6 GW by the same time (REN21, 2016; IRENA, 2016b).
Figure 1.1: Cumulative installed capacity of solar PV based electricity generation in India
Source: IRENA (2016b)
1.2 Solar Photovoltaic Electricity Generation in India
A time trend of PV based installed capacity for electricity generation in India is presented in
Figure 1.1. The solar photovoltaic market in India has grown significantly after the launch of
the Jawaharlal Nehru National Solar Mission in 2010, with total installed capacity of over
9658 MW by the end of 2016. JNNSM was launched in 2010 with a target for grid-connected
the solar power of 20 GW by 2022 which was further revised to 100 GW by the union cabinet
of the Government of India on 17 June 2015 (MNRE, 2015; JNNSM, 2010). This comprises
of 40 GW from the rooftop solar scheme and remaining 60 GW from large and medium scale
grid connected solar power projects.
As indicated above, two approaches can be adopted for photovoltaic generation of electricity-
using land based (ground mounted) photovoltaic plants and rooftop PV systems. A discussion
on relative strengths and limitations of the two routes is presented in Tables 1.1 and 1.2.
4.8 4.3 10.1 11.5 36.8
562.5
1277.1
2268.9
3059.3
4963.5
9658.2
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Installedpower(MW)
Year

3
It is against this background that an attempt to assess the potential of rooftop solar PV power
generation in India and evaluation of its techno-economics and extent of incentives required
to make rooftop PV economically viable has been made in this study.
Table 1.1: Relative strengths and limitations of ground mounted solar PV systems
S. No. Strengths Limitations
1 Easy to opt for tracking option i.e. flexibility to
tilt and adjust panel orientation for maximum
energy generation
Urban settings often do not have
the required land space
2 Better cooling and lower cell temperatures due to
increased air flow around panels and
consequently better efficiency and higher energy
production
Typically more expensive to
install due to the cost of frame,
solid foundations and concrete
footings required for stability to
withstand high wind and storms.3 Larger system can be installed as more space is
likely to be available on the ground than on the
roof
4 Cell cleaning and maintenance is relatively easy Due to increased accessibility, it
may be relatively easy to
damage and vandalize
1.3 Design Details of a Typical Rooftop Solar PV System
A rooftop solar photovoltaic (PV) system, mounted on the roof of a building is an electrical
installation that converts solar energy into electricity. This can be used to meet the building’s
own energy consumption requirements or, in certain situations, fed back into the electrical
grid. Rooftop solar PV systems are distributed electricity generation options, which help to
meet a building’s energy needs or provide electricity within an existing distribution network
(Mahajan and Aggarwal, 2015).

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Table 1.2: Relative strengths and limitations of rooftop Solar PV systems
S.No. Strengths Limitations
1 More suitable for urban settings as exclusive
land is not required
Relatively difficult to opt for tracking
options
2 Installation is typically less expensive as cost
incurred in foundation and concrete footings
can be avoided
Less air flow around panels may
result in higher cell temperature
3 Due to limited access, less prone to damage Shadow from adjacent buildings may
result in lower energy production
4 The end user is right there at the plant site
itself and thus the losses in transmission and
distribution of electricity can be reduced.
Cell cleaning and maintenance may
be relatively difficult
5 Relatively lower gestation period in
installation
The prevailing bye-laws at the
location must have the necessary
clarity and should incentivize
installation of rooftop PV systems.
6
Self-consumption of solar electricity by end-
user at site may help in improved tail-end
voltage and reduce the system congestion
A rooftop PV system consists of PV panels, mounting frames to secure the modules on the
roof, string boxes to connect multiple modules, inverters to convert the direct current (DC)
output of the panel into alternating current (AC), batteries to provide energy storage or
backup power in case of grid failure, DC switch to isolate the PV panel from inverter, energy
meter to record energy uses and indicate system performance and balance of system (BOS)
components include racking, electrical cables, switches, enclosures, fuses, ground fault
detectors etc. (ADB, 2014).
Figure 1.2: Schematic Diagram of a Rooftop Solar PV system
PV panel Inverter AC Voltage AC appliances
DC Appliances
DC Voltage
Sun

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In view of the importance of rooftop solar photovoltaic systems in a country like India, it is
necessary that the comprehensive information on following aspects is obtained so as to make
and implement appropriate strategies for the large-scale diffusion:
a) Potential of Rooftop PV generation in the country.
b) Levelized cost of electricity delivered by rooftop PV system and the impact of
technological and climatic parameters on its value.
c) Identification of appropriate regulatory, financial, policy and fiscal measures that can
expedite the diffusion of rooftop PV in the country.
1.4 Literature Review
1.4.1 Technical feasibility and challenges
 Dawn et al. (2016) emphasized on the need to have a single agency responsible for
framing and implementing support and promotional measures for solar energy
technologies. The writers further noted that the Indian manufacturers are not able to
compete with suppliers of foreign products in PV industry.
 Shukla et al. (2016) analyzed the performance of a 110 kWp a grid connected solar
rooftop PV system using Solarigis PV Planner software and observed that
amorphous silicon (a-Si) and Cadmium telluride (CdTe) PV cells have above 75%
performance ratios under typical weather conditions in Bhopal.
 Sahoo (2016) highlighted the trends and achievements in the generation of
electricity from renewable sources of energy and discussed the recent progress and
existing policies and support measures to promote solar energy in India.
 Kar et al. (2016), some of the key challenges to the solar power development as
noted in their study are grid connectivity and unprepared evacuation infrastructure,
initial capital investment, lack of financing, regulatory and policy developments,
capacity utilization, consumer awareness and acceptance. The study suggested that
strategic support measures like skill development, easy access to financing and
developing a domestic solar component's manufacturing industry may help in
addressing the existing challenges.
 Sandwell et al. (2016) used a model for comparing PV technologies for rural
electrification with grid extension or diesel generation both in terms of the levelized
cost and life cycle emission intensity. They further analyzed and suggested that PV
generation will dominate the most cost effective hybrid system around 2018.

6
 Tripathi et al. (2016) stressed upon the need for harnessing renewable energy
potential for enhanced energy security, reduced greenhouse gas emissions, and
environment-friendly power generation.
 Kappagantu et al. (2015) presented an analysis of rooftop solar PV system
implementation barriers in Puducherry smart grid pilot project. Also, the authors,
during their survey with consumers, noted the high upfront cost, lack of awareness
about net-metering /gross metering policy implications and long payback period as
some of the major concerns in rooftop PV implementation.
1.4.2 Estimation of rooftop solar PV potential
 Singh and Banerjee (2015) studied the effect of tilt angle on plane-of-array to select
an optimum value and estimated the effective sunshine hours, installed capacity of
Mumbai as 2190 MW and annual average capacity utilization factor 14.8%.
Analysis showed that rooftop solar PV systems if deployed at large scale can
provide 12.8–20% of the average daily energy demand and 31–60% of the peak
demand in morning hours.
 TERI (2014) estimated the rooftop solar PV potential for urban settlements in India
to be about 352 GW as technical, 210 as economic and 124 GW as market potential.
In the present study, an effort has been made to refine the assumptions made in their
study.
 Ramachandra et al. (2011) assessed the solar power potential for India from
satellite-derived insolation data and found that nearly 58% part of India receives
annual global average insolation of 5kWh/m2
/day or more which offers immense
power generation and emission reduction potential.
1.4.3 Economics and policy measures
 Rohankar et al. (2016) reaffirmed the financial feasibility of solar power projects
under various policy initiatives and support measures by Indian government and
reduction in the tariff of solar power from ₹ 17/kWh in 2010 to less than ₹ 6 /kWh
in 2015. However, cautioned that significantly lower tariff than the benchmarked
tariff of ₹ 7 (US $ 0.107), may cause a problem to the sustainability of the project.
 Yenneti (2016) noted that the Feed-in-Tariff based Gujarat Solar Power Policy
(GSPP) 2009 can be implemented in other states of India. However, lack of trust of

7
financial institutions on solar energy projects and tradability and bankability of solar
purchase agreements are noted as major challenges.
 Ghosh et al. (2015) reaffirmed the financial feasibility of a rooftop solar PV system
in Bengaluru and observed KERC's net metering scheme at the rate of of ₹
9.56/kWh (without the MNRE capital subsidy) and ₹ 7.2/kWh (with MNRE capital
subsidy) may help domestic consumers to set up rooftop system as a viable
business. Also, suggested to have feed-in-tariff (FiT) and renewable energy
certificate schemes in place for larger rooftop systems on commercial and industrial
rooftops.
1.5 Objectives of the study
In view of the emphasis given by the Government of India to rooftop solar PV power
generation under JNNSM, and several relative merits of rooftop solar PV as against ground
mounted system, it is envisaged to study the following relevant aspects in this study.
(a) Review of potential estimates for rooftop solar PV in selected cities of India and its
extrapolation for entire urban settlements in the country.
(b) Estimation of levelized cost of electricity (LCOE) for rooftop solar PV in selected
cities in India.
(c) Assessment and evaluation of incentives and policy measures for promoting rooftop
solar PV electricity generation.

8
Chapter 2: Estimation of the Potential of Rooftop Solar PV in India
Various steps involved in estimating the potential of rooftop solar PV in India are briefly
described in this section and shown in Figure 2.1. Identification and evaluation of the
assumptions made in one of the recent studies available in the literature (TERI, 2014) with
special focus on
(a) Land area (land use pattern) under different categories of buildings.
(b) Built area (ground coverage) for different categories of buildings.
(c) Field level reported efficiency of rooftop PV system.
(d) Usable rooftop area for solar PV implementation.
(e) Estimation of rooftop solar PV potential in 21 cities and its extrapolation for all
urban settlements in the country.
The assumptions made in this study for estimating the rooftop solar PV potential are given in
Appendix A (Tables A1 to A3).
Study of existing potential of rooftop PV in the report by TERI (2014)
Identification of assumptions made in the report by TERI (2014) for land use
classification, average ground coverage for different categories of buildings, rooftop
area (% of ground coverage), usable rooftop area for rooftop PV installation, efficiency
of PV panels, % of buildings with pucca structure.
Collection of data for land use classification and % share of different building categories
in 21 cities, average ground coverage or built area, average field level reported
efficiency of PV panels installed at 12 different locations in the world.
Identification of observed variations around the assumptions made such as the factors
internalized in estimating usable roof area for PV installations and estimation of rooftop
solar PV potential with refined data for 21 cities and its extrapolation for urban
settlements in India.
Figure 2.1: Steps involved in assessing the potential of rooftop solar PV in India

9
2.1 Factors Used for Estimating Usable Roof Area for PV Installation
2.1.1 Shading from adjacent buildings /trees:
Shading from adjacent buildings is high in the unplanned older settlements while it is less for
the newly developed planned urban areas. This depends on whether the existing building bye-
laws are strictly implemented.
The expected shading losses due to adjacent building structures, trees etc. as reported by
several authors for rooftop solar PV system are listed in Table 2.1 which shows that these
losses vary from 16% to 30% (Pillai and Banerjee, 2007; Nguyen and Pearce, 2012 and
Izquierdo et al., 2008). In this study, a value of 20% as shading loss from adjacent buildings
and trees has been assumed.
Table 2.1: Estimates of shading losses due to adjacent building structures and trees
S. No. % Shading loss Reference Remarks
1 27%
Nguyen and Pearce (2012)
Annual average
2 16% Izquierdo et al. (2008) Non-topological shading applied
to represent the impact of nearby
trees and buildings
3 30% Pillai and Banerjee (2007) Accounts for shading and other
roof uses
2.1.2 Clearance between wall and PV arrays
In each roof, a minimum clearance between the wall and the PV arrays has to be maintained.
A typical 100 m2
roof area for residential buildings and 200 m2
roof area for commercial,
industrial and institutional buildings has been considered in the present study. To estimate the
% share of the clearance in the roof area, two typical roof sizes of 100 m2
and 200 m2
have
been taken with a minimum clearance of 0.6 m on all sides (TEDA, 2014). This works out to
be 23.28% for a 100 m2
roof and 17.64% for a 200 m2
roof. Detailed assumptions and
calculations have been presented in Appendix B. However, this percentage will be further
reduced for the buildings with larger roof areas.

10
2.1.3 Space for other items (such as a solar water heating system) on the roof
For residential buildings, a solar water heating system with 100 Liters per day capacity (2 m2
)
may require a 4 m2
roof space, including the space required for passage and cleaning. As the
hot water requirement for commercial and institutional buildings is more, wherever the hot
water is a priority, the roof will not be available for PV generation and the entire roof will be
accounted for hot water generation only. In this analysis, it is assumed that the entire roof
area under commercial, industrial and institutional buildings will be utilized for solar PV
generation. For industrial buildings, another 10 m2
is reserved for chimneys or exhaust hoods.
An additional 10 m2
roof space is reserved for air condition pipelines, ducts or outdoor units
in commercial, industrial and institutional buildings as shown in Table 2.2.
2.1.4 Space required by water storage tank(s)
For a typical residential building with a 100 m2
roof area (concrete roof), a 1000 litre water
tank will be required which will occupy 1 m2
area on the roof and an additional 1.5 m
clearance around the tank is assumed in this study to avoid shading from the tank, thus
requiring a 4 m2
roof area. However, building bye-laws mandate that a 5000 litre terrace tank
be installed for water sprinklers which will require another 5 m2
space on the roof (Model
Building Bye-Laws, 2016). However, these water tanks may be placed in the areas (adjacent
to staircase room or in one of the corners) so that they do not create hurdle in Solar PV
installation. Another 15 m2
area is reserved for miscellaneous domestic activities for
residential buildings. Considering more water requirement for commercial, industrial and
institutional buildings, a 10 m2
roof area (2 tanks with 5000 litre capacity) has been
considered in this study and a typical roof area for these buildings has been taken as 200 m2
.
2.1.5 Space required by staircase (s)
Based on guidelines in Model Building Bye-Laws (2016), the roof area required by staircase
for different type of buildings varies from 6 m2
(residential buildings) to 15.2 m2
(institutional
buildings). The staircase requirements and estimation of roof area required by staircase for
different type of buildings have been presented in Appendix C (Tables C1 and C2). Further,
the commercial, industrial and institutional buildings are required to have two staircases for
fire safety and other emergency exit requirements (NBC, 2005). These values are presented
in Table 2.2.

11
2.1.6 Inter-row spacing to avoid self-shading losses and cleaning space required for
rooftop PV systems
Self-shading losses are caused by a preceding row of PV modules and apply to all except the
first row of PV modules. These cannot be completely avoided; however, can be mitigated to a
minimum value by choosing an appropriate tilt angle for solar panels (Brecl and Topic, 2011)
and providing sufficient gap between their rows of solar panels.
To overcome these losses, the minimum clearance required for cleaning and servicing of the
panels is 0.6m from the parapet wall and in between rows of panels (TEDA, 2014). This
space can be further utilized for walkways for cleaning purposes as well. Some studies
suggest that the space between modules should be at least three times the height of the tilted
modules at higher latitudes, and at least two times the height at lower latitudes (ADB, 2014).
However, one way to balance this is by installing the fixed PV modules at an angle equal to
the latitude (or lower tilt angles) as fixed panels collect the maximum solar irradiation per
unit area if tilted at around latitude angle (ADB, 2014).
2.1.7 Shading losses due to railings
For a typical 1 m railing the maximum shadow length varies from 1.35 m (8 am, around
June) to 4.94 m (8 am, around December), assumption details and estimation has been
presented in Appendix D. However, the shading effect from railings can be completely
avoided by placing the PV arrays at a height equal to or higher than that of the railings above
the level of roof and the same has been considered for this analysis.

12
Table 2.2: Factors internalized in estimating usable roof area for PV installations
Item
Estimate for % of roof used
Residential Commercial Industrial Institutional
Shading from adjacent buildings and trees 0.2 0.2 0.2 0.2
% Clearance (space between wall and PV
arrays and includes space between PV
panels (to avoid inter-row shading))
0.23 0.18 0.18 0.18
AC pipelines/ ducts/ outdoor units 0 0.05 0.05 0.05
Any other item on the roof (such as solar
water heating system, chimney etc.)
0.04 0 0.05 0
Water storage tank 0.04 0.05 0.05 0.05
Staircase room 0.06 0.11 0.12 0.15
Space for miscellaneous domestic activities 0.15 - - -
Usable roof area for PV applications 0.28 0.42 0.36 0.37
Per census (2011), the total available land area for urban settlements in India is about 77,370
km2
has also been considered in the study TERI (2014) which does not take into account the
rural areas. The assumptions made in TERI (2014) are evaluated and the variations observed
during the present study as well as the steps involved in the estimation of rooftop solar PV
potential in India has been presented in the schematic flow chart, Figure 2.2.
The 21 sample cities considered for this study and their respective climates zones are
presented in Appendix A (Table A4).

13
Built Area
GIS Census 2011
Urban settlements 77,370 km2
Assumptions made in TERI (2014) Observed variations during present study
Land use pattern and % share
Residential – 40
Commercial – 2
Industrial – 3
(2014) and variations observed during the present study
Land use pattern and % share
Residential area – 29.36
Commercial area – 2.04
Industrial area – 3.29
Institutional – 5.75
Ground coverage and % share
Residential area – 55
Commercial area – 40
Industrial area – 60
Ground coverage and % share
Residential – 65
Commercial – 40
Industrial – 50
Institutional – 30
85% of the covered area accounts for roof
Usable roof area for PV Implementation
Residential buildings – 20%
Commercial buildings– 30%
Industrial buildings– 40%
Usable roof area for PV Implementation
Residential buildings– 28%
Commercial buildings– 42%
Industrial buildings– 36%
Institutional buildings– 37%
Technical potential: 352 GW (taking PV
panel efficiency = 10%)
% of buildings with pucca structure (i.e. rooftop
available for Solar PV installation)
Residential – 60
Commercial – 80
Industrial – 50
Institutional – 80
Economic potential: 210 GW and
Market Potential: 124 GW
Technical potential
estimated at 352GW
(12.01% Solar PV efficiency)
Figure 2.2: Schematic flow chart depicting steps involved in the estimation of rooftop solar PV
potential in India

14
(2014) and variations observed during the present study
S.
No.
Assumptions made in
TERI (2014)
Variations observed during
the present study
Remarks
1
Land use pattern and %
share: Avg. of 4 cities
Land use pattern and %
share: Weighted average of 21
cities under study
Institutional buildings,
left out in the study
made by TERI, have
also been taken into
account. The area
under institutional
buildings has been
estimated as 5.75% of
total urban land in
India
Type of land use % Share Type of land use % Share
Residential 40 Residential 29.36
Commercial 2 Commercial 2.04
Industrial 3 Industrial 3.29
Institutional 5.75
2
Average ground coverage Average ground coverage
Model Building Bye-
laws (2016),
HBC (2016)
Type of buildings % Share Type of buildings % Share
Residential 55 Residential 65
Commercial 40 Commercial 40
Industrial 60 Industrial 50
Institutional 30
3
Usable rooftop area for
solar PV implementation
Usable rooftop area for solar
PV implementation
Type of building % Share Type of building % Share
Residential 20 Residential 28
Commercial 30 Commercial 42
Industrial
40
Industrial 36
Institutional
buildings
37
4
10 m2
area is required to
install 1 kW Solar PV
System (efficiency of PV
panel is 10%)
(i.e. 1 km2. = 0.1 GW)
Mono Crystalline - 12.01% i.e.
area required for 1kW system is
8.33 m2
i.e. 1 km2. = 0.125 GW
Average field level
reported efficiency of
PV panels installed in
12 different locations
Continued...

15
Table 2.3 continued...
S.
No.
Assumptions made in TERI
(2014)
Variations observed during the
present study
Remarks
5 Technical Potential: 352 GW
Technical Potential: 352.41 GW
In the present study,
the percentage of
buildings with pucca
structure is included
under technical
potential itself.
6
Economic Potential: 210 GW
- Taking % of buildings with
pucca structure as basis
Type of buildings % Share Type of building % Share
Residential 60 Residential : 263.56 GW 60
Commercial 80 Commercial: 22.54 80
Industrial
50
Industrial : 24.34 50
Institutional : 41.97 80
2.2 Estimation of rooftop solar PV potential for urban settlements in India
For built area estimation, a sample of 21 cities of the country has been considered in the
present study. In order to estimate the rooftop solar PV potential in all urban areas of the
country, a simple linear extrapolation has been undertaken on the basis of total households
with a concrete rooftop in urban India (NHui) as against the total number of households with
the concrete roof in the selected 21 cities (NHsample). Moreover, a correction is made for the
possibility of a different number of stories in the buildings in different urban settlements.
The number of rooftops suitable for PV installations in entire urban India (NHui) considering
the correction factor for multistory buildings is given by
NH*
ui = (2.1)
CF
NH
CF
NH
CF
NH
CF
NH
instimsb,
ui
indmsb,
ui
commsb,
ui
resmsb,
ui

where NH*
ui internalizes the fact that under one roof there could be more than one household
as multistory buildings are common in metro cities and CFmsb,res, CFmsb,com, CFmsb,ind and
CFmsb,insti are correction factors for multistory buildings under residential, commercial,
industrial and institutional categories respectively.
Therefore, the total rooftop PV potential for entire urban settlements in India
(Xui) = (2.2)
NH
NHX
Sample
ui
*
sample 

16
where Xsample represents the PV potential of sample cities on roof area basis, NH*
ui total urban
rooftops suitable for PV installations (which internalizes the correction factor for
multistory buildings) in India, and NHsample the total number of buildings with the
concrete roof in sample cities.
Thus, the estimated rooftop solar PV potential of sample 21 cities has been extrapolated to
give the national level rooftop solar PV potential. The calculation methodology and
assumptions made is presented below.
Table 2.4: Total occupied urban buildings, their % share of under different building
categories, and total rooftops available for solar PV implementation
Category of
buildings
Number of
buildings with
concrete roof
% share of different
building categories
*Rooftops available
for PV
implementation
Residential 78,484,979 79.24 11,620,408
Commercial 11,073,884 11.18 1,453,630
Institutional 7,990,394 8.07 1,398,495
Industrial 1,496,966 1.51 393,003
Total 99,046,223 14,865,536
*The average number of stories assumed for commercial, institutional and industrial
buildings are 4, 3 and 2 respectively.
Source: (Census, 2011)
The buildings occupied as a residence as well as residence-cum-other uses are kept under
residential buildings while shops, offices, hotels, lodges, guest houses etc. are counted under
commercial buildings. Factories, workshops, work sheds etc. are kept under industrial
category and schools/colleges, hospitals/dispensaries, places of worship, other non-residential
buildings are categorized under institutional buildings. The total number of urban buildings
with concrete rooftop, as given in census (2011) is 52,005,804. Estimation of % share under
different building categories is given in Appendix E.

17
Estimation of total rooftops available for PV implementation on residential buildings
The number of stories for residential buildings is estimated based on the population density
(number of people per hectare of land) of 21 sample cities representing both the least
populated cities as well as the most populated ones. While deciding the number of stories, it
is also taken into consideration that even in most crowded cities; all the old buildings were
limited up to maximum 4 stories including ground floor as there were no lifts available. The
detailed assumptions and calculations have been presented in Appendix F (Table F1). The
criteria for deciding the no of floors is summarized below;
Table 2.5: Criteria assumed for deciding number of floors in a building based on population
density of cities
Population density (no of people per hectare) Average number of stories
≥300 5
200 to 300 4
100 to 200 3
up to 100 2
Weighted average of number stories for residential buildings in 21 cities is calculated as
below;
=
21citiesinHouseholdsofno.Total
city21)inHHsofno*storeysof(no.+......+city1)inHHsofno*storiesofno.(%
i.e. CFmsb,res = 3.55
Therefore, the number of residential rooftops available for PV implementation
=
storiesofno.Average
roofconcretewithbuildingsurbantotalbuildingslresidentiaof% 
=
3.55
45,20,05,800.7924
= 11,620,408
Similarly, the total rooftops for PV implementation for commercial, institutional and
industrial buildings have been estimated and presented in Table 2.4.
Therefore, total urban rooftops available for PV installation = 14,865,536

18
The total Rooftop PV potential in urban areas in India
=
cities21inroofconcretewithbuildingsofnumberTotal
oninstallatiPVforavailablerooftopsurbantotalcities21ofpotentialPVRooftop 
=
11559041
14865535352.41
= 453.22 GW
2.3 Results and Discussion
In the present study, an attempt has been made to review the estimates of the rooftop solar PV
potential for urban settlements in India. Table 2.3 shows the estimated potential of rooftop
solar PV for the selected 21 cities in India. The variations observed during the present study
have been taken into account and the estimation has been done accordingly. The technical
potential of rooftop solar PV in India has been estimated to be 453 GW as against 352 GW of
technical potential estimated in TERI (2014). In the present study, the kachcha/pucca
structure of buildings is taken into account in the estimation of technical potential itself which
was accounted for under economic potential in TERI (2014). The increased value of potential
may be due to somewhat higher ground level efficiency (12% against 10%) of solar PV
panels, inclusion of institutional buildings (5.75%), higher ground coverage for residential
buildings (65% against 55% in TERI, 2014) and more usable roof area (Residential 28%,
Commercial 42%, Industrial 36% and Institutional 37%).

19
Chapter 3: Estimation of Levelized Cost of Electricity (LCOE) Delivered
by Rooftop Solar PV Plants at Different Locations in India
3.1 Estimation of Annual Energy Delivered (AED) and Levelized Cost of Electricity
To estimate annual electricity output of rooftop PV system, the System Advisor Model (SAM
version 2016.3.14) has been used. Using the radiation and weather data made available by
MNRE, Government of India (SEC-NREL, 2015), a typical meteorological year file for the
location was created and the same was imported into System Advisor Model to estimate
annual electricity output for different size rooftop systems. A schematic of the methodology
adopted for estimation of annual energy delivered and corresponding levelized cost of
electricity (LCOE) delivered by a rooftop solar PV system is presented in Figure 3.1.
Figure 3.1: Methodology adopted for estimation of annual energy delivered and LCOE

20
For this analysis, systems with 5 kWp and 2 kWp capacity and a DC to AC ratio 1.10 have
been considered in SAM for estimation of annual energy delivered. A Tata Power Solar
module TP250MBZ with 250 Wp capacity has been considered for all systems. Solis make
4590 W inverter (Solis-4.6K-2G-US 240V [CEC2014]) has been considered for 5 kW system
and 450 W AC output Altenergy make (Altenergy Power System inverter -YC500A 240V
[CEC2012]) has been selected for 2 kW system. All systems considered are fixed tracking at
a tilt angle equal to the latitude of that location and facing towards south. Though for a
smaller size system, there could be some difference in LCOE due to relatively higher per kW
cost of the inverter.
The annual energy delivered by rooftop PV system would depend upon the climatic
conditions such as annual average global horizontal irradiance (GHI), wind speed, ambient
temperature etc. Since the values of these climatic parameters vary during the year, it is
necessary that comprehensive databases for GHI and ambient temperature (Ta) are used. The
average annual GHI and annual average ambient temperature for selected locations are
presented in Appendix G (Table G1).
The levelized cost of electricity (LCOE) is a measure that facilitates comparison of various
possible options for producing electricity. It also signifies the price of electricity at which the
cumulative present value of life cycle benefits is equal to the cumulative present value of life
cycle costs. Thus, for a rooftop solar PV owner, the minimum price of the electricity fed into
the grid should be equal to the LCOE pertaining to the rooftop solar PV system. The
levelized cost of energy delivered by a rooftop solar PV system can be estimated from the
following expression:
(3.1)
AED
1-d)(1
d)(1*d
d)(1
C
ACOM
1-d)(1
d)(1*d
C
LCOE
n
n
13
inv
n
n
0 


















where AED represents the annual energy delivered by RTSPV system, ACOM the annual
cost of operation and maintenance etc., d the discount rate applicable for the investment, n the
useful life of the system, C0 the capital cost of RTSPV system, and Cinv the cost of inverter
replacement. For this study, it is assumed that the cost of the inverter will remain same and
the inverter will be replaced in the 13th
year of operation.

21
Using the benchmark cost of RTSPV as provided by MNRE, and the input parameters
used for arriving at the results of this study are presented in Table 3.1, estimates for LCOE
for RTSPV have been obtained for 48 locations considered in this study. The annual
electricity delivered by a 1 kW system varies from 1684 kWh (Jaisalmer) to 1261 kWh
(Kohima). Details of annual energy delivered by different size plants for 48 different
locations in India and their corresponding values of LCOE have been presented in Appendix
H (Table H1).
Table 3.1: Values of input parameters used in this study
Parameter Symbol Unit Description Reference(s)
Capital cost (per kW) C0 ₹ 75,000 MNRE (2016)
Useful life n years 25 CERC (2016b),
TERI (2015),
CERC (2016a)
Discount rate d % p.a. 11
Annual maintenance cost ACOM % 2% of capital cost
Debt-equity ratio fd and fe 70% debt and 30%
equity
CERC (2016b)
Interest rate on
commercial loan
IRc % p.a. 10 -
Rate of return on equity IRe % p.a. 14 -
Loan repayment period LRP Years 10 -
Corporate tax rate (ITax) % p.a. 33.0 (ITD, 2016)
Salvage value S % 10% of capital cost CERC (2016b)
Inverter life - years 12-14 CERC (2016a)
Inverter price - ₹ 76,550 (5 KVA)
31, 250 (2 KVA)
23,750 (1 KVA)
UTL inverters
(PCU vendor)
Estimates of annual energy delivered and the corresponding values of levelized unit cost of
energy for 11 sample locations have been presented in Table 3.2. It should be noted that at all
locations considered in this study, the values for LCOE from RTSPV system are higher than
APPC of conventional fossil fuel based electricity generation. Support in terms of
financial/fiscal incentives for promotion of RTSPV in India is, therefore, recommended at
this stage.

22
Table 3.2: Estimates for annual energy delivered by RTSPV systems, their corresponding
LCOE and APPC of respective locations
State Location
AED (kWh) LCOE (₹/kWh) APPC
(₹/kWh)2 kW 2 kW
Rajasthan Jaisalmer 3368 6.51 4.04
Karnataka Bangalore 3269 6.71 3.97
Chhattisgarh Raipur 3095 7.08 3.30
Jharkhand Jamshedpur 2987 7.34 4.26
Uttarakhand Dehradun 3149 6.96 2.83
Delhi Delhi 2901 7.56 4.48
Himachal Shimla 3208 6.84 2.36
Jammu and Kashmir Srinagar 2812 7.80 3.29
Nagaland Kohima 2523 8.69 3.63
Sikkim Gangtok 2692 8.15 -
Tripura Agartala 2837 7.73 2.82
As seen from Table 3.2, the value of LCOE for a 2 kW system varies from ₹ 6.51/kWh
(Jaisalmer) to ₹ 8.69/kWh (Kohima). The impact of changing the PV module and its
orientation on annual energy delivery and consequently on the LCOE value has also been
studied. No significant effect on energy delivery is observed for a ±15° or ±30° change in
azimuth angle. However, the output decreases significantly for ±45° or ±60° change in its
original orientation due south (i.e. 180° azimuth).
3.2 Sensitivity Analysis of LCOE Delivered by Rooftop Solar PV Systems
Sensitivity analysis is done to ascertain the amount of change in output per unit change in the
input parameter. The various input parameters used in this study for the estimation of LCOE
and the likely reasons for uncertainty/variance are presented in Table 3.3. Uncontrolled and
intermittent nature of solar resources and market uncertainty including future electricity rate
escalations and net-metering policies are likely causes of uncertainty in rooftop PV system
and its implication for the financial viability of the same. An estimate for change in LCOE
per unit changes in input parameters is presented in Table 3.4.

23
Table 3.3: Input parameters for LCOE estimation and probable reasons for variance
Parameters Reasons for uncertainty or variance
Capital cost Learning rate
Breakthrough of new and low-cost technologies
Economy of scale
Market competition
Discount rate lower interest rate
Technical maturity leading to lower risk on investment
No or low cost of currency hedge
Higher rate of return on alternative investment
Change in inflation rate
O&M cost fraction Local availability of multi-skilled manpower
Technical maturity leading to less requirement of repair and
maintenance
The expression for LCOE is (3.2)
AED
C*mCRF*C
LCOE 0o 

where m represents the % value of C0 as ACOM and CRF the capital recovery factor given
by
1d)(1
d)(1*d
CRF n
n


 .
In above expression used for sensitivity analysis, the cost of inverter replacement has not
been considered.

24
Table 3.4: Estimates for sensitivity of LCOE to 1% change in input parameters
Uncertai
nty
Paramete
rs (x)
Unit
Base
value of
parame
ters
x
LCOE


(expression)
x
LCOE


(at base
value)
Extent of
uncertainty
- 1% of
base value
of the
parameter
(for
illustration)
∆LCOE
(*base
value of
LCOE
=6.28
₹/kWh)
Capital
cost C0
₹ 75000
AED
mCRF 
0.0000412 750 0.0309
m
(ACOM
as % of
C0)
% 2
AED
C0
22.27 0.02 0.0045
discount
rate (d)
% 11  
 2n
n11-n
0
1d)(1AED
1n)(1dd)(1d)(1C

 
19.31 0.11 0.021
Useful
life (n)
years 25
 
 2
1nd)(1*AED
d)(1ln*nd)(1*d*-C0


-0.02193 0.25 -0.005
AED kWh 3368 2
00
(AED)
)C*mCRF*(C 
-0.00092 33.68 -0.031
Annual
CUF
% 20 2
00
(CUF)*8760*RC
]C*mCRF*-[C 
-14.85 0.20 -0.030
*base value of LCOE is estimated for d =11%, CUF =20% i.e. AED =3490 (for a 1.992 kW
system)
where RC represents the rated capacity of the plant and CUF the capacity utilization factor.
3.3 Review and Analysis of Rooftop Solar PV Related Policies in the Different States of
India
The various policies and support measures taken by central and state governments to promote
electricity generation from solar energy have been studied and a summary of net-metering
and solar policies are presented in Appendix I (Table I1). MNRE through its central finance
assistance (CFA) scheme provides a capital grant up to 30% of the benchmark capital cost for

25
residential, social and institutional rooftop solar PV projects in general category states /UTs
and 70% for similar projects in special category statesi /UTs. Some states such as
Chhattisgarh, Gujarat, Haryana and Tamil Nadu provide an additional capital grant to
residential consumers for grid connected rooftop PV systems. The Feed-in Tariff mechanism,
so far, is implemented only in 13 states as presented in Appendix J (Table J1), eight of which
has provision for accelerated depreciation. A comparison of feed-in tariff (FiT) with and
without accelerated depreciation benefits is presented in Figure 3.2. Five states do not allow
accelerated depreciation provision and provide a fixed feed-in tariff at the rate of ₹ 5.0 /kWh
(Himachal Pradesh) to ₹ 10.70 /kWh (Madhya Pradesh) as shown in Figure 3.3. A marginal
reduction in the feed-in tariff is observed for the states where accelerated depreciation is
allowed. The net-metering provision has now been notified in all states /UTs. In addition, an
attempt has also been made to review the electricity tariff for different categories of
consumers’ e.g. domestic, commercial, industrial and agricultural in all states /UTs. There is
a large variation in the tariff for different categories of consumers in various states. These
values are presented in Appendix K (Tables K1 to K3).
Figure 3.2: Feed-in tariff (FiT) with and without AD benefits in various states
Source: Tariff orders of respective state electricity regulatory commissions
i
North Eastern States, Sikkim, Jammu & Kashmir, Himachal Pradesh and Uttarakhand, Lakshadweep, A&N
Islands etc. are special category states where CFA up to 70% is provided for RTSPV projects
0
2
4
6
8
10
12
14
6.93
5.74
7.11
8.34
6.52
11.59
6.1 6.28
8.157.69
6.3
7.83
9.34
7.24
13.34
6.74 7.01
9.2
FiT(₹/kWh)
With AD
Without AD

26
Figure 3.3: Feed-in tariff (FiT) in 5 states
Source: Tariff orders of respective state electricity regulatory commissions
Discussion:
As observed from Table 3.4, the LCOE delivered by a rooftop solar PV system is most
sensitive to changes in capital cost (3.1 paisa) and least sensitive to the annual cost of
operation and maintenance (0.45 paisa). The value of LCOE changes about 3 paisa for a 1%
change in the base values of C0 and 2 paisa for a 1% reduction in the base value of discount
rate. The sensitivity of LCOE with AED, CUF and “n” is negative, which indicates that value
of LCOE will increase per unit decrease in the base value of these parameters, which is not
desirable.
7.19
5.0
9.56
10.7
8.9
0
2
4
6
8
10
12
Haryana Himachal Karnataka Madhya
Pradesh
West Bengal
FiT(₹/kWh)

27
Chapter 4: Financial Feasibility of Rooftop Solar PV Systems and
Incentives Required for Their Promotion
4.1 Financial Feasibility of Rooftop Solar PV Systems
The various parameters used for accessing the financial feasibility of rooftop solar PV
systems have been discussed in the following paragraphs.
Payback period
The payback period essentially measures the time elapsed between the point of initial
investment and the point of time at which net accumulated benefits from the project are
sufficient to offset the initial investment outlay.
a) Simple payback period
The simple payback period of an investment can be defined as the time required to recoup the
initial investment (i.e. time to get the invested money back) and does not take into account
the time value of money. It can be estimated as
(4.1)
C-B
C
T 0
SP 
where C0 represents the initial capital investment, B the annual revenue and C the annual
cost.
b) Discounted payback period
It is the length of time required for the project’s equivalent receipts (net benefits) to exceed
the equivalent capital outlays. In discounted payback period the cost and benefits are adjusted
in such a way that it takes into account the changing value of money over time. It can be
estimated using the expression below
(4.2)
d)ln(1
}C*d-C)-ln{(B-C)-(Bln
T 0
DP


where d represents the discount rate applicable to the investment. If the value of (B-C)
<d*C0, it indicates no payback period i.e. the investment made into such a project cannot be
recovered.
Net present value (NPV)
NPV of an investment is the difference between the present value of benefits and the costs
resulting from the investment. A positive NPV means a positive surplus indicating that the

28
investment will be economically viable as the financial position of the investor will be
improved by undertaking the project. Obviously, a negative value would indicate a financial
loss. The NPV of an investment can be estimated by the following expression
(4.3)
d)(1
C
-C-
d)(1
S
d)(1*d
1d)(1
*C)(BNPV 13
inv
0nn
n










where S represents the salvage value of the project and Cinv the cost of inverter replacement.
In the present study, it is assumed that the inverter will be replaced in the 13th
year of
operation.
Internal rate of return (IRR)
IRR is defined as the rate of interest at which the net present value of a series of cash flows is
equal to zero. In other words, IRR is the interest rate at which the discounted present value of
all benefits equals the present value of the costs. It can be expressed as
At d =IRR, NPV =0
(4.4)
C
)C-(B
IRR
0
n
1j
jj

where (Bj-Cj) represents the net benefit in the jth
year.
4.1.1 Estimates of NPV, TSP, TDP, and IRR
Using the above mathematical frameworks, some sample calculations (for a 5 kW system) for
the estimation of simple payback period, discounted payback period, net present value and
internal rate of return for different locations have been done. The values of various input
parameters used in arriving at the results of this study are presented in Table 3.1. The results
obtained have been presented in Table 4.1.

29
Table 4.1: Estimates for TSP, TDP, NPV, and IRR (5 kW system)
Location
AED
(kWh)
FiT
(₹/kWh)
Net
Meterin
g tariff*
(₹/kWh)
Net
benefit
per year
(₹)
NPV of
benefits
(₹)
TSP
(year)
TDP
(years)
NPV
(₹)
IRR (%)
Jaisalmer 8468 6.74 - 49574 417502 7.56 17.10 25550 12.60
Bangalore 8237 9.56 - 71246 600013 5.26 8.29 208061 18.77
Raipur 7782 - 7.25 48920 411988 7.67 17.76 20035 12.41
Jamshedpur 7512 - 3.2 16538 139282 22.67 ** -252670 1.37
Dehradun 7937 9.2 - 65520 551796 5.72 9.52 159844 17.17
Delhi 7297 - 7.3 45768 385447 8.19 22.19 -6505 11.47
Shimla 8092 5.0 - 32960 277581 11.38 ** -114372 7.46
Srinagar 7102 - 3.2 15226 128233 24.63 ** -263720 0.79
Kohima 6347 - 6.5 33756 284280 11.11 ** -107672 7.72
Gangtok 6803 - 4.93 26039 219292 14.40 ** -172660 5.08
Agartala 7138 - 7.2 43894 369661 8.54 26.92 -22292 10.91
**indicates (B-C) <d*C0 i.e. no payback for these locations.
*For net-metering tariff, the highest slab tariff (except Delhi) in the domestic segment has
been taken in this study.
The return on investment will be lower for the locations where IRR<d.
4.1.2 Minimum feed-in tariff (FiT) required for financial viability
The minimum feed-in tariff is the tariff at which net present value of the project becomes
zero (i.e. FiT at which NPV=0). Above this value, the project will make a profit while below
this value the project will be in loss. Minimum value of FiT can be estimated as
(4.5)
d)(1
C
d)(1
S
C
1d)(1
d)(1*d
C*
AED
1
=FiT 13
inv
n0n
n
min 























The estimation of the minimum value of FiT required for the project to meet the breakeven
for different locations has been estimated and different cases such as required FiT when the
capital subsidy is given or loan available at lower interest rates have been studied. The results
obtained have been presented in Table 4.2.

30
Table 4.2: Estimates for minimum FiT required for breakeven (i.e. FiT at which NPV=0) when
capital subsidy or lower rate of interest on capital is provided (5 kW)
Location
AED
(kWh)
FiT required with
capital (C0) subsidy
(₹/kWh)
Minimum FiT required with lower
interest rate loan (d)
(₹/kWh)
10% 20% 30% 10% 9% 8% 7% 6%
Jaisalmer 8468 5.86 5.33 4.80 6.01 5.64 5.29 4.94 4.60
Bangalore 8237 6.02 5.48 4.94 6.18 5.80 5.43 5.08 4.73
Raipur 7782 6.37 5.80 5.23 6.54 6.14 5.75 5.37 5.01
Jamshedpur 7512 6.60 6.01 5.42 6.77 6.36 5.96 5.57 5.19
Dehradun 7937 6.25 5.69 5.13 6.41 6.02 5.64 5.27 4.91
Delhi 7297 6.80 6.19 5.58 6.97 6.55 6.13 5.73 5.34
Shimla 8092 6.13 5.58 5.03 6.29 5.90 5.53 5.17 4.81
Srinagar 7102 6.98 6.36 5.73 7.16 6.73 6.30 5.89 5.49
Kohima 6347 7.81 7.11 6.41 8.02 7.53 7.05 6.59 6.14
Gangtok 6803 7.29 6.63 5.98 7.48 7.02 6.58 6.15 5.73
Agartala 7138 6.95 6.32 5.70 7.13 6.69 6.27 5.86 5.46
Value of FiT as decided by present value of CO2 emission mitigation benefits
Further, the FiT with capital subsidy decided by the present value of CO2 emission mitigation
benefits is presented in Table 4.3. Also, the minimum FiT required when the investment is
made available at a lower interest rate (d = 8%) and a certain fraction of investment is
provided as capital subsidy is presented in Table 4.3.
The average carbon price for solar projects was estimated at US$ 4.1/tCO2-e, the maximum
being $ 8.7/tCO2-e (Forest Trends, 2016). In 2016, the carbon prices range from less than
US$1 /tCO2e to US$131 /tCO2e with about 75% covered emissions priced under US$
10/tCO2e (World Bank, 2016). For this analysis, a price of ₹300/tCO2e (about US$5) has
been considered.

31
Table 4.3: Estimates for the minimum value of feed-in tariff when a capital subsidy
equivalent to CO2 emission mitigation benefits, lower interest rate loan along with
a capital grant (5 kW) is provided
Location
Number of
certified
emission
reduction
units
(*NCERU)
Annual
revenue
from
CO2
(₹)
Net
benefit
from
CO2 in
25 years
(₹)
FiT with capital
subsidy
equivalent to CO2
emission
mitigation benefit
(₹ /kWh)
Base
LCOE
(₹ /kWh)
Minimum FiT
required when
d=8% and with
capital subsidy
(₹/kWh)
10% 20% 30%
Jaisalmer 6.63 1989 16752 5.91 6.47 4.87 4.46 4.04
Bangalore 6.45 1935 16295 6.08 6.65 5.01 4.58 4.15
Raipur 6.09 1828 15395 6.45 7.04 5.30 4.85 4.40
Jamshedpur 5.88 1765 14861 6.69 7.29 5.49 5.02 4.55
Dehradun 6.21 1864 15702 6.32 6.90 5.20 4.75 4.31
Delhi 5.71 1714 14435 6.90 7.50 5.65 5.17 4.69
Shimla 6.34 1901 16008 6.19 6.77 5.10 4.66 4.23
Srinagar 5.56 1668 14050 7.09 7.71 5.81 5.31 4.82
Kohima 4.97 1491 12556 7.96 8.63 6.50 5.94 5.39
Gangtok 5.33 1598 13458 7.41 8.05 6.06 5.55 5.03
Agartala 5.59 1677 14121 7.05 7.67 5.78 5.29 4.79
*1 CERU represents one tonne of CO2 equivalent
As seen in Table 4.2 and Table 4.3, with the capital investment being made available at 8%
(as against 11% in the base case), the LCOE varies from ₹ 5.29/kWh (Jaisalmer) to ₹
7.05/kWh (Kohima). On the other hand, with the provision of 30% capital subsidy, the LCOE
varies from ₹ 4.80/kWh (Jaisalmer) to ₹ 6.41/kWh (Kohima). In case, both these incentives
(30% capital subsidy and the cost of capital at 8%) are provided, the LCOE varies from ₹
4.04/kWh (Jaisalmer) to ₹ 5.39/kWh (Kohima).
4.2 Estimation of Required Level of Incentives for Promotion of Rooftop Solar PV
Systems
4.2.1 Introduction
Incentives are financial/fiscal measures to make renewable energy technologies (RETs) cost
competitive (the LCOE delivered by rooftop PV systems is equal to the APPC of respective
location) with other options for electricity generation. Incentives lead to a reduction in the

32
cost of harvesting renewable energy resources and result in lower per unit cost of energy
delivered to the consumers or society. As a certain portion of the project cost is borne by the
government, it helps in risk reduction for investors and is aimed at leveraging private
investment.
Incentives are aimed at cost reduction as well as other intangible benefits in terms of
environmental benefits, employment generation, self-reliance and benefits from reduced
imports. Also, the incentive is given for demonstration projects so as to create awareness
about new technology and get the feedback for benefits and limitations of that technology.
High initial investment, as well as higher perceived risk to the investor, is the main barrier to
the implementation of renewable energy technologies. Hence some kind of financial support
from government is necessary to encourage private investors, as well as the individuals,
invest in renewable energy projects such as rooftop solar PV system.
As seen in Table 3.2, at all locations considered in this study, the values for LCOE from
RTSPV system are higher than APPC of conventional fossil fuel based electricity generation.
Support in terms of financial/fiscal incentives for promotion of RTSPV in India is, therefore,
recommended at this stage.
4.3 Different Types of Incentives
A brief study of the extent of different incentives required to achieve the target APPC has
been done in this chapter.
As discussed in Chapter 3, the financial viability measure considered for decision making, in
the present study, is the Levelized Cost of Electricity (LCOE) delivered by the rooftop solar
PV system. In order to facilitate a comparative benchmark for estimating the required levels
of each of the incentives considered in the study, the prevailing Average Power Purchase
Cost (APPC) in the relevant locations has been used. The APPC values as prevailing on
different dates (control period) are presented in Table 4.4. A schematic diagram of the
methodology adopted for this study is presented in Figure 4.1.

33
Figure 4.1: A schematic of the approach adopted for studying the effect of incentives on
LCOE delivered by rooftop solar PV systems.
In the present analysis, for each cash flow, end of the period/year convention has been
followed. The frameworks developed for this purpose are presented in the following
paragraphs:
4.3.1 Capital subsidy and viability gap funding (VGF)
In this scheme, a certain fraction of the total capital cost is provided by the government as a
cash grant. If the amount of cash grant is linked with a target value of one or more of the
financial measures representing viability such as LCOE, payback period, NPV, IRR etc., it is
defined as viability gap funding. A provision of capital subsidy or VGF would reduce the
effective value of capital cost in equation 3.1.
The fraction of capital cost to be given as VGF (FVGF) for achieving the target value of LCOE
(=APPC) can be estimated as
 
 
(4.6)
1d1
d)(1*d
*C
ACOMAEDAPPC
1F
n
n
0
VGF































34
Using the frameworks presented above, the extent of VGF (other different financial/fiscal
incentives in following paragraphs) required for the rooftop solar PV systems to be
competitive with fossil fuel based electricity generation in India has been estimated. The
values of various input parameters used in arriving at the results of this study are presented in
Table 3.1. Some sample calculations have been done for required value of incentives such as
VGF, AD, interest subsidy, CERU and investment tax credit and a summary of the results
obtained are presented in the following section.
The values for the fraction of capital cost required to be given as viability gap funding to
ensure that the LCOE of RTSPV is equal to APPC for 11 different locations have been
presented in Table 4.4. It may be noted that VGF in the range of 40.4% to 74.3% of the
capital cost needs to be provided in order for the RTSPV system to achieve APPC of these
locations.
Table 4.4: Extent of VGF required for LCOE to be equal to APPC
State Location
APPC Fraction of capital
cost required as
VGF (FVGF)Value (₹/kWh) References
Gujarat Ahmedabad 3.76 GERC (2016) 0.477
Rajasthan Jaisalmer 4.04 RERC (2016) 0.404
Delhi Delhi 4.48 DERC (2015) 0.439
Chhattisgarh Raipur 3.30 CSERC (2016) 0.594
Himachal Pradesh Shimla 2.36 HPERC (2016) 0.743
Nagaland Kohima 3.63 NERC (2016) 0.655
Mizoram Aizawl 3.11 JERC (2016) 0.666
Karnataka Bangalore 3.97 KERC (2016) 0.440
Maharashtra Mumbai 3.79 MERC (2016) 0.474
Uttar Pradesh Lucknow 3.80 UPERC (2016) 0.559
Tripura Agartala 2.82 TERC (2014) 0.719
4.3.2 Soft loan and interest subsidy
Under the provision of a soft loan, a certain fraction of the capital cost is provided as a loan at
a lower interest rate than the prevailing commercial rates in the market. In the case of interest
subsidy, the difference amount between market interest rate and subsidized rate of interest
applicable for an investor is paid by the government directly to the loan providing bank. With
the provision of interest subsidy, the effective value of the discount rate (d) to be used in
equation 3.1 would be lowered. It helps in reducing the periodic loan repayment installments

35
to the project developer and thus helps in reducing the levelized cost of energy delivered
from the rooftop system.
To estimate the value of annual interest subsidy required to achieve the target value of LCOE,
it is assumed that the system is financed with a debt to equity ratio of 70:30 and the expected
annual rate of return on the equity component is 14%. The subsidized annual interest rate
(IRs) on the debt component at which target value of LCOE is achieved is determined by an
iterative procedure. The weighted average cost of capital (WACC) is determined as:
(4.7))f*IRf*(IRWACC dsee 
where IRe represents the expected annual rate of return on equity component, fe the fraction
of equity in financing RTSPV system, IRs the annual subsidized rate of interest on debt
portion of RTSPV paid by the investor and fd the fraction of debt component. The value of
WACC thus estimated, is used as a new discount rate to estimate the target LCOE (APPC for
that particular location). As, fd, fe and IRe is predetermined, the value of the subsidized rate of
interest on debt portion (IRs) at which the APPC is achieved is estimated.
Assuming that the loan is repaid in equal annual installments, the cash equivalent (present
value) of all annual monetary values of interest subsidy to be given by the government is
estimated using the following expression
  
 
 
 
 
 
)8.4(
d1*d
1d)1
11IR
1IR*IR
11IR
1IR*IR
C*fAIS LRP
LRP
LRP
s
LRP
ss
LRP
c
LRP
cc
0d












































where IRc represents the annual commercial rate of interest on loan and LRP the loan
repayment period.
The rate of interest levied on the loan/debt component of capital cost and monetary value of
interest subsidies required to achieve the target value of LCOE (APPC) by rooftop solar PV
system for different locations has been considered in this study. The monetary value of
equivalent cost for all interest subsidies to government is presented in Table 4.5. It may be
noted that the subsidized rate of interest on debt portion of capital cost varies with location –
0.72% in Raipur and 6.73% in Jaisalmer. For some locations, such as Kohima, Agartala,
Aizawl, and Shimla, even with an interest-free loan, the target APPC is not achieved
indicating that the interest subsidy alone is not sufficient to make rooftop solar PV

36
competitive for these locations. It may be noted that the total cost to the government through
interest subsidy route is much lower than that in the case of viability gap funding.
Table 4.5: Estimation of annual interest subsidy and equivalent cost to the government
Location
Rate of Return
(IRE) on equity
(30% share of
capital cost)
(%)
Subsidized rate
of interest (IRS)
on debt (70% of
capital cost)
(%)
Weighted
average cost
of capital
(WACC)
%
Monetary value of
Interest Subsidy
required
(₹)
Monetary
value of VGF
required
(₹)
Ahmedabad 14 4.53 7.37 23,343 71,560
Jaisalmer 14 6.73 8.91 14,284 60,673
Delhi 14 5.70 8.19 18,582 65,812
Raipur 14 0.72 4.70 37,900 89,100
Shimla 14 -
**
111,450
Kohima 14 - 98,202
Aizawl 14 - 99,829
Bengaluru 14 5.67 8.17 18,706 65,968
Mumbai 14 4.63 7.44 22,941 71,052
Lucknow 14 1.93 5.55 33,437 83,802
Agartala 14 -
**
107,888
**Even with an interest-free loan, the target APPC is not achieved.
4.3.3 Accelerated depreciation
Accelerate depreciation is a provision, in which; the investor is allowed to deduct the cost of
assets out of gross benefits, at a much faster rate than the traditional straight-line method.
Generally, this provision allows greater depreciation in the first few years of the project and
helps in minimizing the taxable income of the investor thereby reducing the income tax
liability of the investor.
a) The extent of depreciation needed in the first year:
The extent of depreciation fad1 (as a fraction of C0) which needs to be allowed for the RTSPV
system in first year itself in order to achieve the target value of APPC can be estimated as

37
(fad1)*C0 (Salvage value =0)
C0 (effective C0)
Effective C0 used for the estimation of AD benefits does not include the land and installation
costs i.e. only plant and machinery costs are taken into account for AD estimations.
)9.4(
1d)(1
d)(1*d
*C
ACOM-AED*APPC
1*
I
d)(1
f
n
n
0
Tax
ad1

















where ITax represents the rate of income tax (corporate rate) applicable to the investors. This
rate is applicable only for profit-making entities (commercial or industrial set ups) and does
not apply to individual/domestic households, NGOs or religious buildings. In the present
analysis, it is assumed that 100% depreciation of assets will be allowed in the first year and
salvage value has not been taken into account.
b) The extent of depreciation needed for two years:
The extent of accelerated depreciation fad2,1 (=fad2,2) to be allowed for RTSPV system in equal
amounts for two consecutive years so as to achieve the target value of APPC can be estimated
as
(fad2,1)*C0 (fad2,2)*C0 (fad2,1 = fad2,2)
C0
)10.4(
1d)(1
d)(1*d
*C
ACOM-AED*APPC
1*
I*1)-d)((1
d)(1*d
f
n
n
0
Tax
2
2
ad2,1


















The values of accelerated depreciation required to achieve the target APPC, both when 100%
AD is allowed in a single year or in equal amounts for two consecutive years, have been
presented in Table 4.6. The fraction of the capital cost which needs to be depreciated in first
years itself to achieve the target value of APPC is varying from 1.36 (Jaisalmer) to 2.5
(Shimla) times the capital cost. This implies that even the provision for 100% depreciation in

38
the first year itself does not seem to be viable for achieving the target value of APPC for
these locations. That is, AD alone is not sufficient which may be due to the unreasonably low
value of APPC from coal based and large hydropower plants. Also, the fraction of the capital
cost which needs to be depreciated (in equal amounts) in two years to achieve the target value
of APPC varies from 0.72 (Jaisalmer) to 1.31 (Shimla) times the capital cost.
4.3.4 Carbon mitigation benefits – certified emission reduction unit
In this scheme, the project developer earns one certified emission reduction unit for each
tonne of CO2 mitigated which can be sold in the market at the cost notified by global/national
mandates on GHG emissions mitigation. This initiative is meant to encourage harnessing of
renewable energy resources so as to mitigate the emission of greenhouse gases (GHG) into
the atmosphere.
Average CO2 emission rate depends on the type of fuel mix used for electricity generation,
which is estimated annually and maintained in CO2 baseline database for Indian Power Sector
by CEA.
The weighted average CO2 emission factor for India has been assumed to be 0.82 tCO2/MWh
(CEA, 2016). On the other hand, life cycle GHG (embodied) emission of complete rooftop
system has been estimated at 0.037 tCO2-eq. /MWh (Fthenakis and Alsema, 2006). Thus, the
CO2 emission factor for rooftop would be 0.783 tCO2-eq. /MWh. Accordingly; the number of
certified emission reduction units can be obtained by multiplying the annual energy delivered
with the net CO2 emission factor. It may be noted that one CERU represents one tonne of
CO2 equivalent.
The required price of the certified emissions reduction unit (PCERU) earned with the use of
RTSPV system so that APPC is achieved can be estimated as;
 
 
 
(4.11)
N
AED*APPCACOM
1d1
d1*d
*C
P
CERU
n
n
o
CERU









For this analysis, it is assumed that the PCERU is uniform during the project life.

39
As explained above, with this provision of incentive in terms of certified emissions reduction
unit, the investors are expected to earn the additional revenue from reducing the carbon
emissions by adopting clean source of energy such as solar energy for electricity generation.
Using equation (4.11), the minimum per unit price of CERU so that the target value of APPC
is achieved by RTSPV system at different locations has been estimated and presented in
Table 4.6. It may be noted that the per unit price of CERU ranges from 2731 (Jaisalmer) to
5767 ₹/CERU which is very high and perhaps no buyer would be interested in buying
CERUs at this price.
4.3.5 Investment tax credit
The provision of investment tax credit (ITC) may be offered to encourage equity investors in
rooftop solar PV systems under which a certain fraction of the equity investment made is
given as income tax credit. In such a case lower rates of return on equity are expected to be
demanded by the equity investors. This may help reduce the capital cost of the system.
In this case, it is assumed that the entire RTSPV system is financed through 100% equity and
the investment tax credit accrues to the investor during the first year itself. In such a case, the
required rate of income tax credit (RITC), on the investment made so that the APPC is
achieved can be estimated as
    (4.12)
1d)(1
d)(1*d
C
ACOM-AED*APPC
-1*d1R
n
n
0
ITC























The rates of ITC to be provided as a financial incentive to the investor so that the LCOE
delivered by rooftop solar PV systems at different locations, is equal to the APPC, has been
estimated and presented in Table 4.6. The required rate of investment tax credit (RITC) varies
from 44.90 % (Jaisalmer) to 82.45 % (Shimla). For example, for the LCOE of RTSPV system
in Mumbai to be equal to the target APPC, an investment tax credit at the rate of 52.58 %
would be required.

40
Table 4.6: Estimates for AD, CERU and ITC benefits for achieving target value of APPC
Location
AD as a fraction of capital cost
needed to be depreciated (fC0)
*Per unit price of
certified emission
reduction unit
(PCERU)
(₹/CERU)
Rate of
investment tax
credit (RITC)
%One year (fad1) Two year (fad2,1)
Ahmedabad 1.60 0.84 3314 52.95
Jaisalmer 1.36 0.72 2732 44.90
Delhi 1.48 0.78 3440 48.70
Raipur 2.00 1.05 4373 65.99
Shimla 2.50 1.31 5271 82.45
Kohima 2.20 1.16 5899 72.67
Aizawl 2.24 1.18 5247 73.87
Bengaluru 1.48 0.78 3060 48.82
Mumbai 1.59 0.84 3300 52.58
Lucknow 1.88 0.99 4447 62.01
Agartala 2.42 1.27 5767 79.84
*The values are rounded off to the nearest integer.

41
Chapter 5: Conclusions and Recommendations
In the present study, an attempt has been made to review the estimates of the rooftop solar PV
potential for urban settlements in India, study their techno-economics and assess the
feasibility of incentivizing their large scale dissemination so as to meet JNNSM targets.
Estimates of annual electricity delivered by rooftop solar PV systems installed at different
locations in India have been obtained using System Advisor Model. The corresponding
values of levelized cost of electricity (LCOE) have also been estimated. A review of different
incentives offered by the central and state governments has been made and their likely
impacts on the financial attractiveness of rooftop solar PV systems have been studied.
5.1 Conclusions
Based on the study undertaken, the following inferences can be drawn;
a. The rooftop solar PV potential of urban settlements in India is estimated at about 453
GW as against 352 GW in the study done by TERI (2014). The increased value of
rooftop PV potential may be due to somewhat higher values of usable roof area,
higher overall field level efficiency of PV systems, the segregation of institutional
buildings contributing about 41.97 GW (in TERI, 2014; commercial and institutional
buildings are put together), and higher ground coverage for residential buildings.
b. The values of LCOE delivered by rooftop solar PV systems vary from ₹ 6.68/kWh
(Jaisalmer) to ₹ 8.92/kWh (Kohima). A reduction of 17 to 23 paisa in the value of
LCOE is observed if the plant size is increased from 1 kW to 2 kW and 22 to 30 paisa
if the plant size is increased from 1 kW to 5 kW. The value of LCOE is observed to be
the most sensitive towards per unit change in capital cost and least sensitive to a
similar change in the cost of operation and maintenance.
c. Out of 11 locations considered for this study, the IRR is less than 8% at 5 locations.
Similarly, NPV is negative at 7 locations, indicating that the rooftop PV system, under
existing conditions, is not viable. With the capital investment being made available at
8% (as against 11% in the base case), the LCOE varies from ₹ 5.29/kWh (Jaisalmer)
to ₹ 7.05/kWh (Kohima). On the other hand, with the provision of 30% capital
subsidy, the LCOE varies from ₹ 4.80/kWh (Jaisalmer) to ₹ 6.41/kWh (Kohima). In

42
case, both these incentives (30% capital subsidy and the cost of capital at 8%) are
provided, the LCOE varies from ₹ 4.04/kWh (Jaisalmer) to ₹ 5.39/kWh (Kohima).
d. For the levelized cost of electricity (LCOE) delivered by rooftop PV systems, to
become competitive, the same should at least be equal to the average power purchase
cost of the utilities (i.e. if the dispatchability constraint with electricity delivered by
rooftop solar PV systems is ignored). Therefore, in this study, the extent of different
incentives required to ensure that the LCOE delivered by the rooftop PV solar
matches with the prevailing average power purchase price in the region, has been
estimated. The extent of VGF varies from 40.4% (Jaisalmer) to 74.3% (Shimla) of
benchmark capital cost. On the other hand, the rate of interest on debt component
varies from 0.72% (Raipur) 6.73% (Jaisalmer). Similarly, the rate of investment tax
credit varies from 44.9% (Jaisalmer) to 82.45% (Shimla). A summary of the extent of
required incentives is presented in Table 5.1.
Table 5.1: The extent of incentives required to make rooftop PV market competitive.
Location
**
LCOE
(₹/kWh) APPC
(₹/kWh)
Extent of incentives required for the LCOE to match
APPC
VGF (as
fraction
of C0)
Rate of
interest on
debt
component
(%)
Fraction of
capital cost to
be depreciated
in the first
year
(fad1)
*+
Unit
price of
CERU
(₹/CERU)
Rate of
investment
tax credit
RITC (%)
Ahmedabad 6.87 3.76 0.477 4.53 1.60 3314 52.95
Jaisalmer 6.68 4.04 0.404 6.73 1.36 2732 44.90
Delhi 7.76 4.48 0.439 5.70 1.48 3440 48.70
Raipur 7.27 3.30 0.594 0.72 2.00 4373 65.99
Shimla 7.02 2.36 0.743 * 2.50 5271 82.45
Kohima 8.92 3.63 0.655 * 2.20 5899 72.67
Aizawl 7.81 3.11 0.666 * 2.24 5247 73.87
Bangalore 6.88 3.97 0.440 5.67 1.48 3060 48.82
Mumbai 6.90 3.79 0.474 4.63 1.59 3300 52.58
Lucknow 7.88 3.80 0.559 1.93 1.88 4447 62.01
Agartala 7.94 2.82 0.719 * 2.42 5767 79.84
*Even with an interest-free loan, the target APPC is not achieved.
**The value of LCOE taken here is for a 1 kW rooftop PV system
*+ Even a provision for 100% depreciation in first year itself does not seem to be viable for
achieving the target value of APPC

43
5.2 Recommendations
a. Study of the possibility of combining two or more incentives to promote rooftop solar
PV systems at a minimum cost to the government should be made.
b. A similar study may be undertaken to estimate the rooftop solar PV potential and their
economic feasibility so as to make a suitable strategy for rural settings in India as
well.
c. Suitability assessment of each of the incentives for specific category of residential,
commercial, industrial and institutional buildings may be carried out

44
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