Cost to Set Up a Solar Farm in India: A Detailed Breakdown of Expenses

Solar farms have become an essential component of India’s efforts to achieve its sustainability goals as a result of the country’s desire for renewable energy. Investors and businesses are becoming increasingly curious about the expenses involved, particularly in light of the abundant sunlight and the support provided by the government.

Putting up a solar farm requires more than simply panels; it also requires a combination of land, technology, labor, and compliance with regulations. You will have a more profound understanding of what it takes to harness solar electricity in India by reading this tutorial, which breaks down the costs involved. What are we waiting for? Let’s discover how much does it cost to set up a solar farm in India.

Solar Farm Costs in India: From Land Acquisition to ROI

1. Land Acquisition: The Foundation of Cost

Land is one of the biggest costs, and it varies by location and size. Depending on the location, costs might range from ₹5 lakh to ₹20 lakh per acre in rural areas, while prices can be higher in urban fringes.

Due to the beneficial policies of states such as Rajasthan and Gujarat, land prices are lower in certain states. It is essential to have clear titles and land-use permissions, which will add legal fees to the overall budget. It is reasonable to anticipate that a farm with a capacity of 1 megawatt will require between 4 and 5 acres of land.

2. Solar Panels: The Core Investment

Panels account for 50% to 60% of the total costs. Polycrystalline panels have a cost of ₹20-25 per watt, whereas monocrystalline panels, which are more efficient, have a cost that ranges from ₹25-35 per watt.

Options that use thin film are less prevalent but more affordable. Quality is important; reputable brands provide longevity, which in turn reduces the expenses of replacement over the long term. Panels alone might cost anywhere from ₹2 to ₹3.5 crore for a farm with a capacity of 1 megawatt (MW), depending on the efficiency and source of the panels.

3. Inverters: Converting Sunlight to Usable Energy

DC to AC power is converted using inverters, which have a cost of ₹0.5-1.5 crore per MW. If you have a large farm, string inverters are more cost-effective (costing ₹50,000-2 lakh each), but they require more units.

On the other hand, central inverters (costing ₹10-20 lakh) are more cost-effective. Hybrid inverters that accommodate batteries add fifteen to twenty percent to the total cost, but they improve reliability. The selection of the appropriate type has an impact on both the initial expenditure and the operational efficiency.

4. Mounting Structures: Stability and Efficiency

There is a cost of ₹0.5-1.2 crore per MW for mounting systems. Fixed structures, which cost between ₹8 and 15 per watt, are the standard. Solar trackers, which cost between ₹20 and 30 per watt, increase output by 15 to 25 percent but add complexity.

Choices of materials, such as galvanized steel versus aluminum, have an effect on both durability and cost. When panels are installed correctly, they are able to survive the elements, which eliminates the need for costly repairs in the future.

5. Labor and Installation: Bringing the Farm to Life

Regional differences in labor expenses range from ₹10 to ₹20 lakh per MW on average. Professionals who are skilled in wiring and panel setup may charge a daily fee ranging from ₹500 to ₹800.

However, specialized teams from cities incur additional travel costs, despite the fact that rural locations offer lower labor. As a result of timely installation, delays are reduced, and projects remain within their budgets.

6. Permits and Regulations: Navigating Legal Requirements

Permit fees might be anywhere from ₹2 to ₹10 lakh, depending on the rules of the state. Environmental permissions, costs for land conversion, and approvals from the grid are everything that must be done.

Processes have been streamlined in states such as Tamil Nadu and Karnataka, which has resulted in fewer delays. In order to avoid fines or the suspension of a project, consulting with legal specialists ensures compliance.

7. Grid Connection Costs: Tying into the Power Network

There is a cost of ₹5-20 lakh per MW for connecting to the grid. In order to cut expenses, proximity to substations is beneficial; yet, isolated places require expensive infrastructure modifications.

Within the framework of renewable energy programs, state utilities might pay for a portion of the expenses. After the initial setup, negotiating power purchase agreements (PPAs) guarantees a consistent stream of cash.

8. Maintenance and Operations: Long-Term Sustainability

The cost of annual maintenance ranges from ₹1-3 lakh per MW. Costs are increased by activities like cleaning panels, changing inverters (after ten to fifteen years), and controlling vegetation.

When problems are discovered early on, Internet of Things-based monitoring helps reduce downtime. Creating a budget that includes money for repairs and insurance protects against unforeseen expenses.

9. Government Incentives: Reducing the Financial Burden

Twenty to thirty percent of the expenses are covered by subsidies from the Ministry of New and Renewable Energy (MNRE). Additional reductions in costs are made possible by the benefits of accelerated depreciation and GST exemptions on solar equipment.

The viability of projects for smaller investors is increased by state-specific incentives, such as the fifty percent subsidy that Karnataka provides to farmers.

10. Financing Options: Making Solar Accessible

A loan from a bank such as SBI or PFC typically has a period of 10-15 years and an interest rate ranging from 8-12 percent. Low-cost solutions include green bonds and international money (such as loans from the World Bank), among other options.

When it comes to funding projects, developers frequently utilize a combination of equity (30%) and debt (70%) to make cash flow easier.

11. Return on Investment: Calculating Profitability

There is an initial cost of ₹4-7 crore for a farm with a capacity of 1 MW. The payback period is between four and seven years, with an annual generation of 1.5 to 2 million units and rates of ₹3-5 per unit.

The profits after payback range from ₹15-30 lakh annually for a period of more than 25 years. Higher sunlight states, such as Rajasthan, give a quicker return on investment (ROI) because of higher yields.

12. Case Studies: Real-World Cost Examples

The cost of a small farm with a capacity of one megawatt (MW) is approximately ₹4-5 crore, making it affordable for startups to obtain subsidies.

The medium farm, which has a capacity of 5 megawatts, is suited for industrial use and costs between 18 and 25 crore. Large farms (50 MW) typically receive financial support from corporate power purchase agreements (PPAs) and cost between ₹150 and ₹200 crore.

13. Obstacles and Things to Take Into Account: Beyond the Price Tag

There are dangers associated with land acquisition delays, inconsistent policies, and storage costs (batteries add ₹1-3 crore per MW). Dust, theft, and grid instability are all factors that have an impact on profitability in remote places.

In order to mitigate these challenges, partnering with competent EPC contractors is recommended.

14. Bank Loans for 1 MW Solar Plants: Financing Your Project

Obtaining a bank loan for a solar plant in India with a capacity of one megawatt (MW) covers between 70 and 80 percent of the overall costs, which reduces the amount of upfront capital demand. With repayment terms ranging from ten to fifteen years, public sector banks such as SBI, PNB, and Indian Bank provide interest rates that range from eight to twelve percent.

Collateral often consists of land or the plant itself, while eligibility is determined by the profitability of the project, evidence of land ownership, and power purchase agreements (PPAs). The effective interest rates on loans are often reduced by two to three percent when they are combined with MNRE subsidies.

Conclusion: Is a Solar Farm Worth the Investment?

Solar farms offer long-term benefits, despite the fact that their starting expenses are quite substantial. Their viability is ensured by the presence of government subsidies, lowering panel prices, and increased demand for electricity.

The return on investment (ROI) can be achieved within a decade with good planning, which is in line with India’s ambition for clean energy. We wish you the best of luck!