Technical Manual for Banks & FIs on

Grid-Connected Rooftop Solar PV

Developed by:
The Energy and Resources Institute (TERI)

How to read and use this manual

This manual was prepared with the intent to sensitize banks and FIs to the relevant technology and
project-related aspects of grid-connected rooftop solar power projects in order to provide guidance
in the evaluation of project loan applications. The content of the manual discusses, among other
topics, the working and components of a grid-connected rooftop solar power system; the relevant
quality standards and benchmarks for projects; an overview of the fiscal and financial incentives for
market growth; the typical energy generation patterns and performance monitoring norms;
recommended system design guidelines; the prevailing business models; and the salient technologyand project-related risks for lenders.

Contents
How to read and use this manual ........................................................................................................... 2
Contents ................................................................................................... Error! Bookmark not defined.
1.

Context ............................................................................................................................................ 4

2.

Explaining grid-connected rooftop solar PV systems ..................................................................... 5

i.

What is meant by a grid-connected rooftop solar PV system? .................................................. 5

ii.

What are the relevant quality standards and benchmarks? ...................................................... 8

iii.

What are the guidelines for designing a grid-connected rooftop solar PV system? ................ 11

iv.

What are the O&M aspects of a grid-connected rooftop solar PV system?............................. 13

Maintenance ................................................................................................................................. 13
Performance monitoring............................................................................................................... 14
System operation and performance ............................................................................................. 14

v.

Business models ........................................................................................................................ 17

3.

Central and State policies ............................................................................................................. 18

4.

On-going schemes and programs ................................................................................................. 19

5.

Financial and economic analysis ................................................................................................... 20

i.

What is the standard project life of a grid-connected rooftop solar PV system? .................... 20

ii.

What are the project lifecycle costs of a grid-connected rooftop solar PV system?................ 20

iii.

What is the typical payback period for grid-connected rooftop solar PV projects?................. 22

iv.

What are the risks involved in lending to a grid-connected rooftop solar PV project? ........... 22
Technology risks ............................................................................................................................ 22
Solar resource data risk................................................................................................................. 23
Power off-taker risk ...................................................................................................................... 23
Policy & regulatory uncertainty .................................................................................................... 24
Developer/Promoter risk .............................................................................................................. 24
Theft and vandalism...................................................................................................................... 24
Low credit profile of borrowers .................................................................................................... 24
Security coverage .......................................................................................................................... 24

Annexure 1: General project development process for grid-connected rooftop solar PV projects in
India ...................................................................................................................................................... 25
Annexure 2: List of State Nodal Agencies (SNAs) ................................................................................. 27

1. Context
In January 2010, the Government of India launched the Jawaharlal Nehru National Solar Mission
(JNNSM) as a part of its National Action Plan on Climate Change (NAPCC), and set out a target to
achieve 20 GW of grid-connected solar power by 2022. This target was revised to 100 GW by 2022 in
late 2014. Under the 100 GW solar power target, 40 GW has been targeted through grid-connected
rooftop solar PV (full 100 GW break-up shown in Figure 1). The market potential of rooftop solar
power in India has been estimated at 124 GW in a recent study by TERI1. While 40 GW is a highly
ambitious target, it is attainable through concerted efforts of the diverse stakeholder segments
involved, viz. banks, system integrators, project developers, state agencies, etc. However, a host of
challenges exist in the way of achieving maximum participation from these stakeholders, and it is
essential to address their individual and shared issues to achieve the common goal. Participation of
the banking sector is key to any forward progress. To that end, the concerns of banks in lending to
grid-connected rooftop solar PV projects need to be addressed. Issues expressed by banks
particularly include lack of clarity and understanding of the system as well as the associated risks.
This manual is designed as an informative guide for banks & FIs to impart a working knowledge of
grid-connected rooftop solar PV systems and the associated project risks. It is meant to aid in the
evaluation of loan applications for grid-connected rooftop solar PV projects. The structure of this
manual covers a general description of the system, its components, its working, supporting policy
framework, on-going government schemes & programs, and approaches to estimate the power
generation and the various cash flows.

Reaching the sun with rooftop solar, TERI, 2015

2. Explaining grid-connected rooftop solar PV systems

i.

What is meant by a grid-connected rooftop solar PV system?

A solar photovoltaic (PV) system is a renewable energy power generation technology that uses
photovoltaic modules to generate electricity directly from solar radiation, using a phenomenon
called the photovoltaic effect. The electricity generated can be stored, used directly, or fed back into
grid. Solar PV is a very reliable and clean source of electricity that can suit a wide range of power
generation applications such as residential, industrial, agricultural, etc. The technology has seen
significant success for power generation in recent years across the world, such as USA, Germany,
Japan, China, etc. A grid-connected rooftop solar PV system refers to a solar PV system that is
located on the roof of a building and is connected to the local distribution grid. It is a form of
distributed power generation. The general working of the system can be summarized below.
A grid-connected rooftop solar PV system includes different components that are selected
depending on the system type, site location and application. In the Indian context, system
components generally comprise of the following components: PV modules, mounting structures,
inverter and BOS (meters, junction box, cables, etc.). Batteries and tracking mechanisms are usually
not seen in grid-connected rooftop solar PV systems in India, mostly because of the high costs of
these components.
The major components of a solar PV system are:

PV Modules The PV modules are the devices that actually convert solar energy to
electricity. PV modules are made from PV cells, which are most commonly manufactured
using silicon; other materials used include cadmium telluride (CdTe), copper indium gallium
selenide/sulfide (CIGS). Generally, silicon-based solar cells provide higher efficiency (15% 20%) but are relatively costly to manufacture, whereas thin film cells are cheaper but less
efficient (5% - 10%). Since different types of PV modules have different characteristics (in
terms of efficiency, cost, performance in low irradiation levels, degradation rate), no single
type is preferable for all projects. Good quality PV modules generally have a useful life of 25
to 30 years, although the performance steadily degrades by about 20% over life time.
It is important to assess the quality of PV modules for use in projects. There exist a number
of quality standards developed by international and national organisations for the testing
and certification of PV modules and their performance. These are described later in this
section.

Inverter Because the PV modules produce DC

power and electrical appliances (and the distribution
grid) predominantly require AC power, the inverter
in the system converts the DC power into AC power.
Inverters for solar PV power projects come in various
sizes and specifications; for grid-connected rooftop
solar applications, inverters come in standard sizes
ranging from a few hundred watts to a few hundred
kilowatts, depending on system size. There are many
different types of inverters in the market; selection
of an inverter for a project depends on a number of
factors, including application, size, cost, function,
usage, etc. Some inverters also perform energy monitoring functions. In the Indian market,
there is a deficit of availability of indigenous inverters, with the market being captured by
foreign inverter manufacturers. From the technology perspective, inverters have matured to
a large degree and opportunities of cost reduction through technology innovation are not
expected in the market. Top-of-the-line inverters offer efficiencies in the range of 95% - 98%.
Product standards for inverters are discussed later in this manual.

Mounting structure The mounting

structure, or racking system, is the
support structure that holds the PV
panels. PV modules are generally
mounted on support structures in order
to more efficiently capture solar
insolation, increase generation, and have
a stable structural support. Mounting
structures can be either fixed or tracking.
Fixed tilt mounting systems are simpler,
low-maintenance and cheaper than
tracking systems. Due to these reasons, fixed tilt mounting structures are the norm in India.
Mounting structures designs are highly specific to site and application, and have over time
have seen improved durability and reduced costs. Cost reduction is mostly achieved through
designs that use less material (mostly steel). Mounting structures for rooftop solar PV
installations also require compliance with regulations or guidelines associated with the
structural aspects of the roof, such as load-bearing capacity, wind loading, etc.

Balance of System These consist of cables, switchboards, junction boxes, meters, etc.
Electricity meters record the amount of electricity consumed and/or produced (in kWh and
kVAh) by a customer within a premises. In addition to the metering of the net energy
consumption/production of a grid-connected rooftop solar PV system, most regulations in
India on metering also stipulate the location of an energy meter for measuring the
generation of the PV array.

A schematic of the general

working of a grid-connected
rooftop solar PV system is given
in Figure 1. Grid-connected
rooftop solar PV systems are
generally characterized by:

Electricity generation in
daytime
Low maintenance
requirement
Simple installation
Easy scalability
Robustness
High upfront investment
WHAT DOES GRID-CONNECTED ROOFTOP SOLAR PV OFFER?
Due to the nature of the technology, the electricity generated varies by day, season,
year and is also dependent on geographical location. Typically, a small 200 kWp
grid-connected rooftop solar PV system will:

Generate ~25,300 units of electricity in a month (average);

Consist of 800 1,200 PV panels occupying 2000 m2 (50m x 40m) roof
space. As thumb rule the area requirement for SPV system is 10 m2/kW;
Generates 3,03,600 kWh in a year and at 8 Rs/kWh grid electricity cost, the
solar energy can potentially offset Rs 24,28,800 annually in utility bills;
Payback in 4-10 years considering a 15% rebate on initial cost. However, the
system will last for over 20 years;
The solar output can be supplied to the grid and earn revenue if the SPV
system produces in excess of electricity requirement or when the building is
vacant.

ii.

What are the relevant quality standards and benchmarks?

Certification and standardization of PV system components is an on-going process in India. It is also

essential to the fast growth of the sector, since without product certification and standardization,
there will be a lack of confidence in the technology and consequently, a higher risk perception
among project debt financiers in the market. In recognition of this, the Government of India has
pushed the identification and use of product standards (international standards, if Indian standards
not available); with respect to the development of indigenous standards, there is an on-going effort
involving the Government of India, PTB (Physikalisch-Technische Bundesanstalt Braunschweig und
Berlin), TERI, CPRI (Central Power Research Institute), QCI (Quality Council of India) and others.
There exist a number of standards, concerning product quality, safety, performance, durability, grid
interconnection, efficiency, harmonics, surge protection, power quality, etc. Since BIS standards
have not yet been developed for all PV system components, other certifications are in use in the
market when BIS certification is not available, such as those of IEC (International Electrotechnical
Commission).Table 1 lists the different standards and product certifications for various PV system
components (further standards applicable as developed from time to time).
Mandatory

Advisory

Solar PV Modules/Panels
IEC 61215/ IS 14286

Design Qualification and Type Approval

for Crystalline Silicon Terrestrial
Photovoltaic (PV) Modules

Yes

IEC 61646/ IS 16077

Design Qualification and Type Approval

for Thin-Film Terrestrial Photovoltaic
(PV) Modules

Yes

IEC 62108

Design Qualification and Type Approval

for Concentrator Photovoltaic (CPV)
Modules and Assemblies

Yes

IEC 61701

Salt Mist Corrosion Testing of

Photovoltaic (PV) Modules

Yes

IEC 61853- Part 1/ IS

16170 : Part 1

Photovoltaic (PV) module performance

testing and energy rating : Irradiance
and temperature performance
measurements, and power rating

Yes

IEC 62716

Photovoltaic (PV) Modules Ammonia

(NH3) Corrosion Testing

IEC 61730-1,2

Photovoltaic (PV) Module Safety

Qualification Part 1: Requirements for
Construction, Part 2: Requirements for
Testing

IEC 62804 (Draft

Specifications)

Photovoltaic (PV) modules - Test methods

for the detection of potential-induced
degradation. IEC TS 62804-1: Part 1:
Crystalline silicon

IEC 62759-1

Photovoltaic (PV) modules

Transportation testing, Part 1:
Transportation and shipping of module

Yes (As per

site condition
like dairies,
toilets)
Yes

Yes (PIDresistant
modules)
Yes

Mandatory
package units
Solar PV String Inverters/PCUs
IEC 62109-1, IEC
62109-2

Safety of power converters for use in

photovoltaic power systems - Part 1:
General requirements, and Safety of
power converters for use in photovoltaic
power systems - Part 2: Particular
requirements for inverters. Safety
compliance (Protection degree IP 65 for
outdoor mounting, IP 54 for indoor
mounting)

Yes

IEC/IS 61683
(For Standalone
System)

Photovoltaic Systems Power

conditioners: Procedure for Measuring
Efficiency (10%, 25%, 50%, 75% & 90100% Loading Conditions)

Yes

BS EN 50530

Overall efficiency of grid-connected

photovoltaic inverters:
This European Standard provides a
procedure for the measurement of the
accuracy of the maximum power point
tracking (MPPT) of inverters, which are
used in grid-connected photovoltaic
systems. In that case the inverter
energizes a low voltage grid of stable AC
voltage and constant frequency. Both the
static and dynamic MPPT efficiency is
considered.

Yes

IEC 62116/ UL 1741/

IEEE 1547

Utility-interconnected Photovoltaic
Inverters - Test Procedure of Islanding
Prevention Measures

Yes

IEC 60255-27

Measuring relays and protection

equipment - Part 27: Product safety
requirements

Yes

IEC 60068-2 (1, 2, 14,

27, 30 & 64)
(Already present
except 27,64)

Environmental Testing of PV System

Power Conditioners and Inverters
a) IEC 60068-2-1:
Environmental testing - Part 2-1: Tests Test A: Cold
b) IEC 60068-2-2:
Environmental testing - Part 2-2: Tests Test B: Dry heat
c) IEC 60068-2-14:
Environmental testing - Part 2-14: Tests Test N: Change of temperature
d) IEC 60068-2-27:
Environmental testing - Part 2-27: Tests Test Ea and guidance: Shock
e) IEC 60068-2-30:
Environmental testing - Part 2-30: Tests Test Db: Damp heat, cyclic (12 h + 12 h
cycle)
f) IEC 60068-2-64:

Yes

(Will become IEC

62891)
(For Grid-connected
System)

Advisory

Mandatory
Environmental testing - Part 2-64: Tests Test Fh: Vibration, broadband random
and guidance
IEC 61000 Series

Electromagnetic Interference (EMI), and

Electromagnetic Compatibility (EMC)
testing of PV Inverters (as applicable)

Yes

Fuses
IS/IEC 60947 (Part 1, 2
& 3), EN 50521
(Already present)

General safety requirements for

connectors, switches, circuit breakers
(AC/DC):
a) Low-voltage Switchgear and Controlgear, Part 1: General rules
b) Low-Voltage Switchgear and Controlgear, Part 2: Circuit Breakers
c) Low-voltage switchgear and Controlgear, Part 3: Switches, disconnectors,
switch-disconnectors and fusecombination units
d) EN 50521: Connectors for photovoltaic
systems Safety requirements and tests

Yes

IEC 60269-6

Low-voltage fuses - Part 6:

Supplementary requirements for fuselinks for the protection of solar
photovoltaic energy systems

Yes

Surge Arrestors
IEC 60364-5-53/ IS
15086-5 (SPD)

Electrical installations of buildings - Part

5-53: Selection and erection of electrical
equipment - Isolation, switching and
control

Yes

Cables
IEC 60227/IS 694, IEC
60502/IS 1554 (Part 1
& 2)

General test and measuring method for

PVC (Polyvinyl chloride) insulated cables
(for working voltages up to and including
1100 V, and UV resistant for outdoor
installation)

BS EN 50618

Electric cables for photovoltaic systems

(BT(DE/NOT)258), mainly for DC cables

Yes

Yes

Earthing /Lightning
IEC 62561 Series
(Chemical earthing)

IEC 62561-1
Lightning protection system components
(LPSC) - Part 1: Requirements for
connection components
IEC 62561-2
Lightning protection system components
(LPSC) - Part 2: Requirements for
conductors and earth electrodes
IEC 62561-7
Lightning protection system components
(LPSC) - Part 7: Requirements for earthing
enhancing compounds

Yes

Advisory

Mandatory

Advisory

Junction Boxes
IEC 529

Junction boxes and solar panel terminal

boxes shall be of the thermo plastic type
with IP 65 protection for outdoor use, and
IP 54 protection for indoor use

Yes

Energy Meter
IS 16444 or as specified
by the DISCOMs

a.c. Static direct connected watt-hour

Smart Meter Class 1 and 2 Specification
(with Import & Export/Net energy
measurements)

Yes

Battery/Electrical Storage
IEC 61427-1

Secondary cells and batteries for

renewable energy storage - General
requirements and methods of test - Part 1:
Photovoltaic off-grid application

IS 13369

Stationary lead acid batteries (with

tubular positive plates) in mono-bloc
containers

IEC 61427-2

Secondary cells and batteries for

renewable energy storage - General
requirements and methods of test - Part 2:
On-grid applications

Yes

Solar PV Roof Mounting Structure

IS 2062/IS 4759

Material for the structure mounting

DIN EN 1991-1-4

Actions on structures, Part 1-4: General

actions Wind actions

iii.

Yes

What are the guidelines for designing a grid-connected rooftop solar

PV system?

The design of a PV plant aims at achieving the lowest possible levelized cost of electricity. It
comprises identification of load, sizing of system, selection of suitable technologies/products, which
requires assessment cost, power output, benefits / drawbacks of technology type, quality, spectral
response, performance in low light, nominal power tolerance levels, degradation rate and warranty
terms.
Selection of inverter includes assessment of compatibility with module technology, compliance with
grid code and other applicable regulations, inverter-based layout, reliability, system availability,
serviceability, modularity, telemetry requirements, inverter locations, quality and cost.
In designing the site layout, the following aspects are important:

Choosing row spacing to reduce inter-row shading and associated shading losses
Choosing the layout to minimise cable runs and associated electrical losses
Allowing sufficient distance between rows to allow access for maintenance purposes
Choosing a tilt angle that optimises the annual energy yield according to the latitude of the
site and the annual distribution of solar resource

Orientating the modules to face a direction that yields the maximum annual revenue from
power production; as India is in the northern hemisphere, the modules will usually be southfacing, although sometimes they are kept facing west in order to sync generation with
evening peak demand

The electrical design of a PV project can be split into the DC and AC systems. The DC system
comprises the following:

Array(s) of PV modules

Disconnects/switches

DC cabling (module, string and main cable)

Protection devices

DC connectors (plugs and sockets)

Earthing

Junction boxes/combiners

The AC system includes:

Inverter

Transformers (only for large size systems)

AC cabling

Substation (only for large size systems)

Switchgear

Earthing and surge protection

Automatic data acquisition and monitoring is important in the design of any grid-connected rooftop
solar system. It allows comparison of actual generation with design calculations during the system
operation, and helps in identification and analysis of faults.
In the design phase, it is also important to give due consideration to the surrounding structures, for
particular use in shading analysis.
For system design, one of the most commonly used software in India is the PVSYST, which has
become the industry standard. Table 1 lists some of the various PV system design software prevalent
in the sector, both in India and abroad.
Table 1: Commonly used software for PV system design

Software
RETScreen

HOMER

NREL Solar Advisor Model (SAM)

SolarGIS pvPlanner

Description
Developed by: Canadian government, industry,
academia
Use: Evaluation of energy production, savings,
costs, emission reductions, financial viability, risk
Developed by: Originally developed by NREL;
Now licensed to HOMER Energy
Use: Design of distributed energy systems,
including technical and economic feasibility
analysis
Developed by: NREL (National Renewable
Energy Laboratory)
Use: Estimation of energy production, peak and
annual system efficiency, LCOE, capital cost,
O&M costs
(used with TRNSYS)
Developed by: SolarGIS

PV F-Chart

PVSYST
SolarPro

Use: Site prospecting, prefeasibility and predesign assessment, yield assessment

Developed by: F-Chart Software
Use: Estimation of energy generation, efficiency,
load, economics, life cycle costs, equipment
costs
Developed by: PVSYST Photovoltaic Software
Use: Study, sizing, simulation and data analysis
Developed by: LaPlace Systems
Use: Estimation of power production, life cycle
analysis

With regard to PV design, IEC has released a standard, the IEC 62548 PV arrays Design
requirements, which does not have an equivalent BIS standard at present. This standard sets the
design requirements for PV arrays, also including DC array wiring, electrical protection devices,
switching and earthing provisions.

iv.

What are the O&M aspects of a grid-connected rooftop solar PV

system?

Maintenance
Compared to most other power generating technologies, solar PV systems have very low
maintenance and servicing requirements. However, suitable maintenance of a PV plant is essential
to optimise energy yield and maximise the life of the system.
Scheduled maintenance typically includes:

Module cleaning (dust, bird dropping and other debris can cause 5-10% decrease in power
generation)
Checking module connection integrity
Checking junction / string combiner boxes
Thermographic detection of faults using Thermographic camera
Inverter servicing
Inspecting mechanical integrity of mounting structures
Vegetation control
Routine balance of plant servicing / inspection

Common unscheduled maintenance requirements include:

Tightening cable connections that have loosened

Replacing blown fuses
Repairing lightning damage
Repairing equipment damaged by intruders or during module cleaning
Rectifying supervisory control and data acquisition (SCADA) faults
Repairing mounting structure faults

Manufacturers and developers generally have set practices for PV system maintenance, with many
offering multi-year AMCs (Annual Maintenance Contracts); AMCs are mandatory for developers and

system integrators that are empanelled with MNRE as Channel Partners under the Ministrys gridconnected rooftop solar PV scheme. AMCs mandate that the contractor shall carry out the required
maintenance activity (including replacement of equipment) inside the guarantee period of the AMC
(usually 2-5 years), without any cost to the customer.
A typical AMC for a grid-connected rooftop solar PV system would include:

Pre-decided maintenance schedule

Supply of spare parts as required
Replacement of defective modules, inverters, etc.
Maintenance of log sheets for operational detail
Complaint logging and its attending
Insurance (machine breakdown insurance, general insurance covering fire, earthquake, etc.)

Performance monitoring
An important aspect of a complete grid-connected rooftop solar PV system is performance
monitoring. This is essential in the successful operation and maintenance of the system, since it
provides the relevant data for fault
detection and performance analysis.
At minimum, the data includes the
data logged in inverters, switches and
meters. This is the case in small-size PV
systems.
In MW-scale PV systems, more
sophisticated data acquisition systems
(e.g. SCADA) are required in order to
procure and assimilate data from a
number of monitoring devices,
including weather data measurements.
In these systems, the system operator/owner (as per business model) should monitor the
performance once a day, to ensure generation adherence to design estimates, timely detection of
faults and deliver optimal performance.
Figure 1: Typical energy generation curve in a day under clear-sky
System operation and performance
conditions
The actual generation is very closely
related to the instantaneous solar
irradiance on the surface of the solar module, and follows a bell curve as solar radiation increases
and decreases from morning to evening. An example of a generation curve for a day under clear-sky
conditions is shown in Figure 2.

Energy generation of a solar PV system can be estimated using the system size (kW p or MWp), basic
solar resource data, and system losses (Figure 3 shows a Sankey diagram depicting typical PV system
energy losses). In the preliminary project phase, generic estimations can be made using just these
parameters. For more accurate calculations, software products are available that use locationspecific weather data records, PV module configuration (angle, orientation, etc.), efficiency, losses,
array design, cell temperatures, inverter characteristics and so on. The generic estimations are

useful in preliminary project feasibility assessments, and are useful since they provide quick and easy
estimations. These estimations provide year-wise generation data in the project life; they cannot be
used for monthly/daily/hourly generation estimates. However, these are discarded for more
accurate estimations using specialized software products in the design phase of the project. These
detailed estimations require a lot more data for obtaining the desired generation estimates, but they
provide very detailed generation estimates as well, including month-wise, day-wise and hour-wise
generation.

Energy generation calculation examples of both generic estimations and software-based simulations
are provided in this section for reference by lenders.
Generic estimation
Generic estimations use a small number of parameters to give a crude approximation of the
generation performance of a PV system. These can be made more realistic by accommodating more
parameters into the calculation. There are also different means of calculation, using different input
parameters. Generally, the following parameters are considered:

System size (in kWp or MWp)

Deration (%):
Deration refers to various factors in PV systems which cause power losses, including inverter
loss, slight manufacturing inconsistencies in modules, electrical impedance/resistance,
temperature, dust and other environmental conditions, aging and maintenance issues.
Peak sun hours (hours/day):
Peak sun hours refers to the average hours of full solar radiation (1000 W/m2) received in a
day at a location; this amounts to an equivalent of the amount of solar radiation actually
received over the year
No. of effective sunshine days in year (days/year):
This refers to the number of days in a year for a location that can be assumed to have full
solar radiation (1000 W/m2) for the peak sun hours duration

Module degradation rate (%):

PV modules suffer from degradation, due to a variety of reasons, over the product life,
which causes the generation capacity per module to decrease over time; this decrease in
generation is captured in an annual degradation rate, usually about 0.2-0.5%

These estimates can also be used for project economic and financial analysis, such as payback, NPV,
etc. for the financial feasibility assessment of projects.
Table 2: Input parameters for energy generation estimation

Parameter
System size
Degradation rate
Peak sun hours
No. of sunshine days in year
Deration
Project life

Unit
kW
%
hrs/day
days/yr
%
years

Value
50
0.50%
5
300
20%
25

A short calculation using the above

parameters is illustrated below (Table 3
& Figure 4):

Yearly generation (kWh/yr)

Such methods of generic energy

generation estimation are typically used
in project pre-feasibility assessments to
evaluate the rough energy generation, revenue, payback, NPV, etc.
1,400
1,200
1,000
800
600
400
200
-

Energy generation

2015201720192021202320252027202920312033203520372039
Year

Figure 2: Typical energy generation of PV system over project life

Software-based generation estimation

There are a number of software products (listed in Table 2) available in the market that are used for
PV project planning and design. Nearly all of them include detailed estimations of energy generation
over the life cycle of the system, including hourly, daily and monthly generation, using large amounts
of input data.
Figure 5 shows a typical PVSYST report showing the estimate of normalized energy generation (in
kWh/kW/day) of a PV system for every month of a year.
Such energy generation estimates are produced during the design phase of the project, after the
initial phases of feasibility assessment, site selection, etc. have been carried out.

Figure 3: Illustrative PVSYST report for normalised energy generation for a PV system

v.

Business models

There are primarily two business models for grid-connected rooftop solar PV projects: CAPEX and
OPEX. Both business models have their merits and demerits; choice of business model for a
particular project depends upon a number of factors, such as roof owner priorities, desirable
operating conditions, profitability, etc. Table 4 lists some of the key features of both business
models.
Table 3: Key features of CAPEX and OPEX business models

CAPEX
Project owned by roof owner/consumer
Roof owner/consumer responsible for O&M of
system after initial 1-2 year period
Cant be converted to OPEX model at a later date
Power to be used for captive consumption;
surplus power can be sold to distribution utility

OPEX*
Project owned by project developer/supplier
Roof owner/consumer not responsible for O&M;
O&M is responsibility of project developer
Can be converted into CAPEX at a pre-decided
date (option to buy back)
Power can be sold to roof owner;
Power can be sold to distribution utility;
Power can be sold to third party**

*project developer is usually a Renewable Energy Service Company (RESCO)

**some state regulations do not permit this mode of operation; should be checked at the time of project
conception/planning

3. Central and State policies

In late 2014, the Government of India expanded the initial 20 GW target to 100 GW of gridconnected solar capacity by 2022; comprising 40 GW through grid-connected rooftop solar and 60
GW through ground mounted installations. To achieve the planned ramp-up of solar capacity from
the existing 3 GW to 100 GW by 2022, many opportunities for investment have been created
through a variety of schemes launched by the Government. These schemes include provisions to
expedite the existing mechanism of project development, by reducing the amount of clearances
required and providing land to developers on a plug-and-play basis.
In 2011 by the amendment in the National Tariff Policy 2006, an increase in Solar Renewable
Purchase Obligation (Solar RPO) compliance has been prescribed from a minimum of 0.25% in 2012
to 3% in 2022. Under the revised target, the solar RPO compliance has increased to 10.5% by 2022
for all state utilities and other obligated entities. The central government is actively supporting the
development of solar projects by developing attractive schemes for developers and power
consumers installing solar PV projects. The incentives offered by the central government are
segment specific and aim to attract investment by providing suitable policies. Various other direct
and indirect incentives currently offered by the government to promote solar energy include:
Policy Measure
100% foreign
investment in equity

Beneficiary
-

10-year tax holiday

System Owner /
Power Generator

Income tax benefits

through accelerated
depreciation

System Owner /
Power Generator

Concessional custom
duty on imports

Project Developer

Central Financial
Assistance (CFA) as a
capital subsidy on solar
PV projects

System Owner /
Power Generator
(Residential /
Institutional /
Social consumer)

Brief Description
100% foreign investment as equity in solar power
projects is allowed, with an aim to attract foreign
investors and developers and build up solar power
generation capacity.
Under Section 80-IA of the Income Tax Act, 1961 the
Central Government provides a 10-year tax holiday,
in which the beneficiary has the freedom to choose
a 10-year continuous period in the first fifteen years
of the project life to avail the tax benefit. The
projects are taxed using the Minimum Alternate Tax
(MAT) rate, which is significantly lower than the
corporate tax rate.
Solar power generation projects have the option of
profiting from Accelerated Depreciation benefit by
the Central Government, as per Section 32 of the
Income Tax Act, 1961. Companies can use this to
substantially reduce tax burden in the first few
years of the project, up to 100% of the project cost
(80% accelerated depreciation and 20% additional
depreciation).
The Central Government has mandated concessions
and exemptions on specific materials imported for
manufacture of solar power generation products as
well as for use in solar power generation projects.
Both Central and State Governments frequently
provide subsidies on capital costs of solar power
projects through various schemes and programmes.

In addition to the policy push by the Central Government, a number of State Governments have also
come out with policies and regulations concerning grid-connected rooftop solar PV power. So far, 15
states have released relevant policies and 21 states have released regulations on grid-connected
rooftop solar PV power. The key features of different state policies are compiled in Annexure 2.

4. On-going schemes and programs

The Govt. of India has provided a range of measures for implementing rooftop solar PV installations
in the country for the successful implementation of the National Solar Mission.
1. Off-Grid & Decentralized Solar Applications:
In continuation of "Off-grid & Decentralized Solar Applications" during the 12th Period under
JNNSM, MNRE issued guidelines for implementation of " Grid Connected rooftop and Small
Solar power plants programme" in the year 2014. It is being implemented by multiple
agencies, comprising of SNAs, SECI, and other government organizations such as PSUs/State
Departments/Local Governments/Municipal Corporations/ NHB/ IREDA/Metro Rail
Corporations of different States, etc. Under the programme, a grant of 30% of the project
cost is provided by MNRE as CFA. The scheme is for projects size in between 1kWp to 500
kWp.
2. Installation of Grid-connected Rooftop Solar PV power plants with aggregate 52 MW
through Multi Government Agencies (MGAs) through National Clean Energy Fund (NCEF):
The project size will range from 10 kW to 500 kW. For residential/small office sector, project
size may also vary between 1 kW to 10 kW. The project will be implemented by MNRE in
Government/ commercial/ Institutional/ residential buildings through Multi Governmental
Agencies (MGAs). The MGAs would consist of Government Institutions, Public Sector
Undertaking (PSUs), DISCOMs, DMRC, Commercial Banks, National Housing Bank, Railways,
Army, Financing Institutions/Financial Integrators etc. Central Financial Assistance would
total to Rs. 143.20 crores (USD 23 million) for the 52 MW of aggregate capacity addition in
various states across the country.
3. Installation of Grid-connected Rooftop Solar PV Power plant with aggregate 54 MW
capacity through State Nodal Agencies (SNAs) through National Clean Energy Fund (NCEF):
The project size will range from 10 kW to 500 kW. For residential/small office sector, project
size may also vary between 1 kW to 10 kW. The project will be implemented by MNRE in
Government/ commercial/ Institutional/ residential buildings through State Nodal Agencies
(SNAs) in every state and Union Territories (UTs) under the control of State Governments/
UT administration. Central Financial Assistance would total to Rs. 149.85 crores (USD 24
million) for the 54 MW of aggregate capacity addition in various states across the country.
4. Installation of Grid-connected Rooftop Solar PV Power plant with aggregate 73 MW
capacity in Warehouses in various states across the country through National Clean Energy
Fund (NCEF):
The project size will range from 500 kW to 5 MW size. The projects will be implemented in
the warehouses owned by various organizations like Warehousing Corporation of India,
Food Corporation of India, State Government Organizations and some private companies
which have huge vacant roof space and vacant land in/ around the warehouses. SECI will be
the nodal agency for MNRE for the implementation of the scheme. Central Financial

Assistance would total to Rs. 148.92 crores (USD 24.17 million) for the 73 MW of aggregate
capacity addition in various states across the country.

5. Financial and economic analysis

i.

What is the standard project life of a grid-connected rooftop solar PV

system?

PV modules generally have a product life of about 25 years, which is why solar PV projects are also
generally considered to have a 25-year project life. CERC, in its renewable energy tariff
determination orders, also assumes a 25-year useful life in the calculations for solar PV projects.

ii.

What are the project lifecycle costs of a grid-connected rooftop solar

PV system?

Solar PV systems have a high upfront cost and low operational costs, due to there being no fuel
requirement or usage. For grid-connected rooftop solar PV systems, operational costs are very low,
as there is no need for battery replacement. Generally, operational costs for grid-connected rooftop
solar PV systems include general up-keep and maintenance, inverter replacement, and replacement
of other BOS components (meters, junction box, cables, etc.).
Table 4: Typcial Capital Cost breakdown for a grid-connected rooftop solar PV system

PV system component
PV modules
Inverter
Mounting structure
Other BOS (Junction box,
cables, meters, etc.)

%age of Capital Cost

45-55%
20-30%
15-20%
5-10%

Table 6 shows the general breakup of the

capital cost for a small-medium sized
grid-connected rooftop solar PV project.
The average capital cost for gridconnected rooftop solar PV systems is ~
Rs. 80/Wp. With increase in system size,
economies of scale may allow cost reduction, down to an average capital cost of Rs. 70-75/Wp.
Generally, annual operational costs are assumed to be ~ 2% of the capital cost in most financial
analyses.
Table 7 gives the general assumptions used for the financial analysis of a grid-connected rooftop
solar PV system.
Table 5: General assumptions used in financial analysis of grid-connected rooftop solar PV projects

Parameter
Installed capacity
Operating days
Average Capacity Utilization Factor
(CUF)
Average Capital Cost
Equity investment

Unit
kW
days/yr

Value
1
365

20.5%

Rs./kW

80,000

30%

Comments
Industry norm
As per MNRE data on solar PV power
plant energy generation for Phase-I of
JNNSM (available on MNRE website)
CERC guidelines
Assumption;
Also assumed in CERC (Terms and
conditions for tariff determination
from Renewable Energy Sources)

Debt investment
O&M expenses

%
%

70%
2%

Escalation in O&M expenses

5.72%

Module output degradation rate per

year

0.5%

Interest on loan term

12.3%

Loan tenure

yrs

12

Moratorium

yrs

0-0.5

Insurance charges on cost

Book depreciation rate limit
Depreciation as per IT Act WDV

%
%
%

0.1%
90%
15%

Accelerated Depreciation rate WDV

80%

Income Tax (regular)

Minimum Alternate Tax (MAT)

%
%

33.99%
20.01%

Regulations, 2012
Assumption
Typical
As per CERC (Terms and conditions for
tariff determination from Renewable
Energy Sources) Regulations, 2012
Typical;
May vary for different manufacturers
In CERC (Terms and conditions for
tariff determination from Renewable
Energy Sources) Regulations, 2012, an
interest rate of 12.3% is assumed
As per CERC (Terms and conditions for
tariff determination from Renewable
Energy Sources) Regulations, 2012
0.5 years As per CERC (Terms and
conditions for tariff determination
from Renewable Energy Sources)
Regulations, 2012
Assumption
Of book value
As per Income Tax Act, 1961
As per Income Tax Act, 1961 for
Income Tax benefit

Acc. to Section 80-IA of Income Tax

Act, 1961
In the CERC (Terms and conditions for
tariff determination from Renewable
Energy Sources) Regulations, 2012,
%
10.81
the discount rate equivalent to PostDiscount rate
Tax Weighted Average Cost of Capital
is used for the purpose of levelized
tariff determination
Major lifecycle costs in a grid-connected rooftop solar PV project generally comprise the following:
Tax Holiday

yrs

10

1. Initial Capital Cost

a. PV modules
b. Inverter
c. Mounting structure
d. Other BOS (Junction box, cables, meters, etc.)
In large-sized projects, there might be a need for purchase of a transformer as well,
which can add to the cost.
e. Site assessment and development cost
For small-medium sized projects, site assessment and development costs are not
significant, since the PV system only needs to be procured, placed and fixed at the
selected positions as per design. However, for large-sized projects, sometimes site

assessment and development can become a significant cost component, such as in

the case when roof extension or other civil work is desired.
f. Licensing
In some projects, there might be a need to procure licenses for start of commercial
operation that has a standard cost.
2. Scheduled replacement costs
a. Inverter replacement
Solar inverters generally have a life of ~ 10 years; although some high quality
products may continue to function well for a few more years. After this period,
inverters need to be replaced.
3. O&M cost
Annual O&M costs are generally assumed to be ~ 2% of the initial capital cost, with an
escalation rate of ~ 5.72% as per CERC after the first year of operation.

iii.

What is the typical payback period for grid-connected rooftop solar

PV projects?

A grid-connected rooftop solar PV system generally has a payback period of 6-8 years. However, this
is highly dependent on the business model of the project. Since there is not a lot of variation in the
cost structure of well-designed and implemented grid-connected rooftop solar PV projects, the
revenue model becomes very important in ascertaining the projects financial health. For instance,
states in India have their own policies and regulations for grid-connected rooftop solar PV projects,
such as Feed-in Tariff (FiT) and Net Metering. The FiT as well as the tariff structure can vary as
decided by the State Electricity Regulatory Commission (SERC), which can lead to big differences in
the financial viability of grid-connected rooftop solar PV projects in different states. Also, other
business models such as those based on Power Purchase Agreements (PPAs) or roof leasing can have
widely different mechanisms for determining the financial viability.
It may be noted that most grid-connected rooftop solar PV project financing in India relies on the
financial health of the balance sheet of the project developer as this reduces the risk exposure of the
lending institutions.

iv.

What are the risks involved in lending to a grid-connected rooftop

solar PV project?

There are various risks involved in lending project debt to a grid-connected rooftop solar PV project.
These can vary depending upon the size of the project, state, etc. In this section, these risks have
been briefly explained and possible risk mitigation options explored.
Technology risks
Since the grid-connected rooftop solar PV industry and the solar PV power industry itself, is
relatively new and yet to mature, there is some risk in the selection of PV system components. PV
modules have a product life of 25 years, but the industry itself does not have that much experience
with 25 years operating life of PV systems, including the lifecycle performance of PV modules and
other system components with respect to module failure, performance degradation, etc. This
contributes to some uncertainty in the projects financial viability over the project life. Also, like in
any industry, there are a number of low-quality products available in the market, which may hold

the attraction of initial cost reduction opportunities. Use of such components adds to the technology
risk in a project.
Technology risks can be mitigated to a large extent with a few measures early on in a project. These
can be:

Careful screening of project experience of developer/promoter

Usage of high-quality system components from well-established manufacturers
Statement of generation guarantee by the project developer

It may be helpful to develop a list of preferred suppliers for reference in evaluation of loan
applications.
Solar resource data risk
Availability of good-quality solar resource data is essential to the estimation of energy generation by
the PV system. In India, solar resource data is not easily available. There have been some efforts
toward the development of a nation-wide network of solar resource measurement stations, with the
establishment of 115 solar resource measurement stations across the country, but site-specific solar
resource data for rooftop solar projects is difficult to get. Satellite-based solar resource data is
available, but the accuracy of that data is not very reliable, as per market experience. The only way
to get reliable data is through on-site measurement, although full-year data is difficult to obtain this
way.
In the absence of site-specific reliable solar resource data, it is generally best to get the required
data from different sources and conduct separate analysis of energy generation. The solar resource
data used can be substantiated with site-specific solar resource risk assessment study by a
consultancy organization, if required.
Power off-taker risk
Power off-taker risk in FiT- or Net Metering- based projects is one of the biggest concerns in a
number of states. This is caused by a number of reasons, such as:

Poor financial health of distribution utilities

Poor record of enforcement of regulations in some states
Delay in payments by distribution utilities

In projects based on PPAs also, the credibility of the power purchaser should be carefully assessed
before signing of the PPA. This includes risk associated with roof owners; the credit profile of the
roof owner should also be carefully assessed.
Poor financial health of distribution utilities and poor enforcement of regulations put the financial
viability of the project at risk. Ideally, lenders can avoid this risk by focussing lending operations in
states with a proven track record of payment by distribution utilities.
In PPA-based projects, apart from an in-depth evaluation of the power purchasers credibility, the
specific terms and conditions of the contract are also very important.

Policy & regulatory uncertainty

The Indian solar PV market has seen a number of different policies and schemes so far. Despite the
major focus given to the solar PV power sector by the Government of India, there has been a
notable lack of consistency in policy. However, in the grid-connected rooftop solar PV segment,
there has been comparatively greater policy stability and consistency, apart from the capital subsidy
disbursement on 30% of project cost till late last year due to deficit of funds. Currently, that issue
stands resolved and the terms for disbursal of subsidy have been clarified by MNRE.
Developer/Promoter risk
The grid-connected rooftop solar PV market in India is still in its nascent phase; so, there are a large
number of developers and promoters without sufficient experience. Thus, it is of utmost importance
to do an in-depth evaluation of the technical and financial capability of the developer and/or
promoter of the project. Ideally, a developer should have prior full project development experience
from start to finish for multiple projects as well as a team of sufficient experienced manpower to
carry out the tasks of the project. The experience of the developer also matters in obtaining the
requisite clearances and approvals for the project to move forward, which can otherwise cause
unnecessary delays in project development.
Theft and vandalism
Although not much observed in rooftop solar installations, maybe due to the limited number of
systems installed till date, theft and vandalism are causes for concern for lenders. Currently, there is
no standard facility in grid-connected rooftop solar PV installations that guards against this risk.
Low credit profile of borrowers
The grid-connected rooftop solar PV technology is a decentralised and distributed power generation
technology which targets individual consumers, whether commercial/ industrial/ residential/
institutional etc. By definition, the consumer base is characterized by a large pool size with small
investment sizes. In India, many of these consumers have little experience with long-term financing,
with a majority having working capital relationships. This poses an issue in lending long-tenure
project debt to these borrowers.
Also, it is found that a majority have insufficient free business cash flows with which to service their
debt schedule.
Lastly, inadequacy of KYC (Know Your Customer) details of the potential borrowers increase the risk
assessment of lenders.
Security coverage
Grid-connected rooftop solar PV systems by themselves have low and untested resale value in the
market, which makes it difficult to use the PV system as security for the project debt. There is also
the uncertainty regarding continued availability of the roof space over the 25-year project life with
no security interest. In addition to that, many potential borrowers will have inadequate business
assets for holding as collateral on the loan.

Annexure 1: General project development process for grid-connected

rooftop solar PV projects in India
The project development process for grid-connected rooftop solar PV projects in India does not
follow any established protocols/procedures, since the market is yet to mature so not enough
project development has taken place, and there are a number of government schemes/programs
and implementation models which have different modes of implementation. However, there is a
general set of stages that most project development processes follow, which includes (i) Project
Planning/Preparation, (ii) System Design, (iii) Implementation, and (iv) Operation & Maintenance.
This set of steps has been illustrated to show the common aspects of grid-connected rooftop solar
PV project development in India. It is to be noted that the project development process described
here is for the purpose of understanding only, and may differ from state-to-state.

Annexure 2: List of State Nodal Agencies (SNAs)

Andhra Pradesh

http://nedcap.gov.in/Home.aspx

Andaman & Nicobar Islands

http://electricity.and.nic.in/

Arunachal Pradesh

http://www.apeda.org.in/

Assam

http://www.assamrenewable.org/

Bihar

http://breda.in/abour_us.html

Chhattisgarh

http://www.creda.in/

Delhi

http://delhi.gov.in/wps/wcm/connect/doit_eerem/EEREM/Home/

Goa

http://geda.goa.gov.in/

Gujarat

http://geda.gujarat.gov.in/

Haryana

http://hareda.gov.in/

Himachal Pradesh

http://himurja.nic.in/

Jammu & Kashmir

http://jakeda.nic.in/
http://ladakhenergy.org/

Jharkhand

http://www.jreda.com/

Karnataka

http://kredlinfo.in/

Kerala

http://anert.gov.in/

Lakshadweep Islands

http://www.lakpower.nic.in/

Madhya Pradesh

http://www.mpnred.com/Home/Index.aspx

Maharashtra

http://www.mahaurja.com/

Manipur

http://manireda.com/

Meghalaya

http://mnreda.gov.in/

Mizoram

https://zeda.mizoram.gov.in/

Nagaland

http://www.nrengl.nic.in/

Odisha

http://www.oredaodisha.com/

Punjab

http://peda.gov.in/main/

Rajasthan

http://www.rrecl.com/Index.aspx

Sikkim

http://sreda.gov.in/

Tamil Nadu

http://teda.in/

Telangana

http://tg.nedcap.gov.in/

Tripura

http://treda.nic.in/

Uttarakhand

http://ureda.uk.gov.in/

Uttar Pradesh

http://neda.up.nic.in/

West Bengal

http://www.wbreda.org/