Cost and Break-Even Period of Rooftop Solar Installations Under PM Surya Ghar Yojana
Prime Minister Narendra Modi Announces Flagship Rooftop Solar Scheme
The Centre has launched the PM Surya Ghar Muft Bijli Yojana, a flagship rooftop solar scheme that promises up to 300 units of free electricity every month to households. The scheme, announced by Prime Minister Narendra Modi on January 22, 2024, aims to provide rooftop solar power systems to 10 million low- and middle-income households.
Under the scheme, residential consumers can install rooftop solar systems with government subsidy support, up to a maximum subsidy of Rs 78,000 for systems up to 3 kW. The total subsidy for systems larger than 3 kW is capped at Rs 78,000.
Economics of Rooftop Solar
The installation cost of rooftop solar systems in India currently ranges from Rs 60,000 to Rs 80,000 per kW before subsidy. However, with the government subsidy support, the effective out-of-pocket cost can be significantly reduced. In some states, including Uttar Pradesh, additional state subsidy of Rs 30,000 may further reduce the effective cost.
Subsidy Structure
| System Size | Subsidy |
|---|---|
| Up to 3 kW | Up to Rs 78,000 |
| Larger than 3 kW | Capped at Rs 78,000 |
The government claims that subsidy support can cover up to 40 percent-60 percent of the cost, depending on system size. In some states, additional state subsidy may further reduce the effective cost.
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Break-even Period
The break-even period depends mainly on three factors: system size, tariff, and usage patterns. For instance, a household that installs a 3 kW rooftop solar system costing around Rs 1.8 lakh can recover the installation cost in a little over four years. With an average generation of 275 units, the system can save nearly Rs 2,200 per month, or around Rs 26,400 annually.
| System Size | Payback Period (Years) |
|---|---|
| 1 kW | 3.5-4.5 years |
| 2 kW | 3.5-4.5 years |
| 3 kW | 3.5-4.5 years |
However, if the installation is financed through a loan, the payback period may stretch by another one or two years, depending on the loan tenure and interest rate. Households in Uttar Pradesh could recover the cost faster, potentially in about 3 years, as the state also offers an additional subsidy of up to Rs 30,000 on top of the central assistance.
Long-term Benefits
Most rooftop solar systems are designed to last 25 years or more. After recovering the installation cost, households may continue to enjoy significantly lower electricity bills for nearly two decades. Consumers can also export excess electricity to the grid through net metering, which further reduces the power bill in many states. The government has also enabled collateral-free rooftop solar loans through banks to reduce the upfront burden on households.
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