Financial Viability of Rooftop PV Systems in Residential Housing Societies in India

Abstract

Around 75% of rooftop photovoltaic (PV) installations come from the commercial and industrial (C&I) segments. One of the significant reasons behind the large adoption by C&I consumers is their higher electricity tariff than domestic consumers. Domestic consumers’ reluctance to install PV systems can be attributed to lower electricity tariffs (than C&I consumers), high capital costs for small plant capacity, and limited access to capital. This paper uses a cash-flow model approach to study the effect of location and size on a simple payback period and internal rate of return under different compensation scenarios and various capital cost conditions. This paper aims to understand the conditions under which the rooftop PV project becomes financially viable for the investor. It is found that under prevailing tariff and subsidy conditions and assumptions, the system’s internal rate of return is sensitive to the capital cost, and it halves as the capital cost doubles. The results show that higher self-consumption results in significant improvement in payback period and rate of return, demanding policies that promote the self-consumption of electricity at the consumer end. The existing net-metering/billing mechanism can be replaced with a mechanism that promotes self-consumption and discourage consumers from injecting electricity into the grid.