Subsidy On Solar Panel: Everything You Need To Know About Solar Power Government Subsidies

Solar energy is the energy obtained from the sun which is renewable and can be used for multiple purposes. India’s geographical location is such that it receives tropical sunlight from anywhere in a large quantity throughout the year. By installing a solar rooftop system, people can generate energy and use it the way they want. This energy can be used for commercial, residential, and industrial purposes.  Solar energy is eco-friendly as it can curb the user’s carbon footprint. According to the research, 5000 Trillion kWh per year energy is experienced over India’s land area with a majority of parts receiving nearly 4-7 kWh per sq. m per day. However, the problem is, the majority of the Indians can’t afford the cost of rooftop solar installation. As the Ministry of New and Renewable Energy(MNRE) says, the average cost of a rooftop solar system connected with the grid is 75 per watt. Addressing this problem, the government has introduced a solution of subsidy schemes and other incentives that have encouraged people to transition to solar power for personal or commercial use. Both the Central Government and State Nodal Agencies (SNA’s) offer subsidy schemes and encourage people to cut down their electricity bills. Deep diving into the concept of Government subsidy for solar system installation in India. India has earned the title of the fastest developing solar power industry on a global scale and also for producing lower-cost solar power in the world. Various schemes have been launched to encourage the domestic use of solar power.  Some interesting ones are as follows:- 

Why does the Government give Solar Subsidies?

The Indian Ministry of New and Renewable Energy (MNRE) has introduced various Central Financial Assistance (CFA) schemes to favor the use of solar energy in India and achieve the target of 100 GW electricity usage. Through this government will provide subsidies on solar panels to enterprises that are contributing to the growth.

This subsidy on solar panels is for institutional, residential, and social sectors and not for commercial, industrial, and public sector undertakings. 

The Ministry of New and Renewable Energy (MNRE) says that the Central Government pays 30% of the benchmarked installation cost for roof PV systems which is limited to some states, whereas a subsidy of 70% benchmark installation costs is offered to special category states of North which are Uttarakhand, Himachal Pradesh, Jammu & Kashmir, and Uttar Pradesh. The target solar rooftop installations should be cumulatively 8 lac consumers by the end of the financial year  2021-22 and the solar rooftop subsidy will be provided accordingly. 

State subsidy of 40% should be available for solar rooftop systems up to 3kW and 20% for solar rooftop systems between 3 kW to 10 kW, which will be installed and commissioned by private residential consumers. If the capacity of the solar rooftop system is beyond 1 kilowatt DC, it can be installed irrespective of a sanctioned load of consumers. There is a possibility that a subsidy on a solar panel can be limited to the maximum capacity of 10 kW. 

Various schemes introduced by the government

The Indian government has come up with various solar panel schemes to provide to the enterprises that are promoting growth.  

For Solar parks and Ultra-mega solar power projects:

  • CFA totaling INR 2 M/MW or 30% of the project’s cost. This also includes grid-connectivity costs.
  • Additionally, INR 2.5 M per plant is also availed for conducting surveys and preparing Detailed Project Reports(DRPs) 

For grid-connected rooftop:

CFA will provide 30% benchmark cost for general and 70% CFA costs for residential, social, and institutional sectors. 

For the development of grid-connected PV plants on canal banks and tops:

This is an industrial subsidy on the solar panel.  The financial support offered is 30 % of the project cost for canal top projects and 15% of the project cost on canal bank projects. 

The total amount CFA will distribute is INR 2.25 Billion for 100 MW for a maximum of two years. It will have to pay a 1% service charge to Solar Energy Corporation of India (SECI)  

For PV lightning systems, power plants, and solar pumps: 

Lighting systems

  • For lights, lanterns streetlights, and lead-acid batteries the benchmark cost will be INR 340/W and CFA- INR 102/W 
  • For street lights with lithium Ferro phosphate batteries. Benchmark cost- INR 475/W and CFA- INR 142.5/W 

Solar power plants with battery banks 

2 VAh/W with a capacity of up to 10 kW. Benchmark cost- INR 135/ W and CFA- INR 40.5/W 

Solar pumps from 3 HP to 5 HP   

Up to 3 HP (DC): CFA= INR 30,000/HP & Benchmark cost= 120,000/ HP 

Up to 3 HP (AC): CFA= INR 25,000/HP & Benchmark cost: 100,000/HP 

3 HP to 5 HP (DC): CFA= 19,000/ HP & Benchmark cost= 95,000/HP 

3 HP to 5 HP (AC): CFA= 17,000/ HP & Benchmark cost= 85,000/HP

Benefits of Subsidy on solar panels

  • For solar panel schemes in India, if you are planning to install rooftop PV systems you can avail of loans up to Rs 10 lakhs from nationalized banks under the category of home loans or home improvement loans. 
  • Consumers will also be eligible for generation-based incentives and receive Rs 2 per electricity generated. 
  • The average cost of solar rooftop PV installation will be around 60,000-70,000 which after leveraging solar rooftop subsidy will sum up between 42,000-49,000. 
  • Under the Indian government solar panel scheme, a customer can also earn up to Rs 2000 to 3000 per annum as a generation-based incentive.  To obtain a generation-based incentive, the electricity generation by each customer should be around 1100 kWh to 1500 kWh. 
  • Furthermore, people can also sell excess electricity and would receive a regulated cost per unit as per tariffs set by the government. 

Demerits of Subsidy on solar panel

There are some demerits too if you install a solar system for homes in India through government subsidy which is as follows.  

Shorter-warranty period- The solar installer through the government solar subsidy scheme offers a full system warranty of 5 years only. You might have to change the inverter after 5 years  

No brand options- The Indian government solar panel scheme does not offer you a lot of brand options in solar panels or inverters. The choice of solar panel selection remains optional.  

The other limitations you are likely to face are 

  • Up-front cost.
    Frequently changing policies of the government. 
  • Return on Investment takes time of 3 to 5 years.
  • The timeline of Return subsidy amount from DISCOMs is not assured.

Subsidy on Solar Panel Scheme in India 2022

Gujarat

Solar rooftop subsidies in Gujarat are precise and calculated. Gujarat has been given the target of 8,024 MW capacity of solar energy by 2021-22 which should cater to nearly 2 to 8 lac customers by the end of the financial year 2021-22. The 3,200 units from these should contribute towards the rooftop segment. The state subsidy of 40% for rooftop systems should be available up to 3 kW and 20% for a range between 3 kW to 10 kW. These should be installed and commissioned by private residential consumers. However, the subsidy should be limited to the maximum capacity of 10 kW. NetMetering Charges are extra as per Discom & any special customisation may be charged extra by Installer.

MNRE Solar Benchmark Cost 2021-22: Grid Connected Rooftop Solar Power Plant

CapacityStates other than Special Category(Rs/KWp)Special Category States (Rs/KWp)
1 KWp51,10056,210
Above 1 KWp – 2 KWp46,98051,670
Above 2 KWp – 3 KWp45,76050,330
Above 3 KWp – 10 KWp44,64049,100
Above 10 KWp – 100 KWp41,64045,800
Above 100 KWp – 500 KWp39,08042,980

Note:

  • Special category States include the North-Eastern States including the Category States/ Sikkim, Uttarakhand, Himachal Pradesh, Jammu & Kashmir, UTs, Ladakh, Andaman & Nicobar and Lakshadweep Islands.
  • The above-mentioned benchmark costs are excluding net metering costs and battery backup costs.
  • The above benchmark costs are inclusive of total system cost including Photo-Voltaic solar modules, inverters, balance of systems including cables, Switches/Circuit Breakers /Connectors/ Junction Boxes, mounting structure, earthing, Lightening arrester, cost of meters (if any other than net meter), local connectivity cost, cost of civil works, foundations etc. and its installation, commissioning, transportation, insurance, capital cost of online monitoring, comprehensive maintenance charges for five years, applicable fees and taxes etc.

Delhi 

The governmental body, Ministry of New and Renewable Energy(MNRE) has sanctioned 10 MW capacity to each BSES Yamuna Power Ltd (BYPL), BSES Rajdhani Power Ltd (BRPL), and Tata Power Delhi Distribution (TPDDL). It encourages people to switch to solar energy and reduce the use of fossil-fuel-based electricity making buildings self-sustainable from the point of electricity. The scheme with an aggregate capacity of 10 MWP in each power distribution company ensures the installation of grid-connected to roof-top solar PV projects. The subsidy on the solar panels is available broadly in many categories

Karnataka 

The Indian Government solar panel scheme in Karnataka is a bit different than other states. This scheme is called ‘Surya Raitha (Solar pump) subsidy scheme. If a farmer uses a solar pump in their field for farming activities the state government will provide subsidies to farmers. These pumps are approx 1.5 times more efficient than usual pumps and reduce the supply by approx 1/3rd of the total energy.

Rajasthan

Rajasthan is the largest state of India by area and is home to many beautiful cities like Jodhpur, Udaipur, and Jaipur. It is also one of the leading states when it comes to solar power, with more than 1381 MW of solar power already in use. Additionally, 47.1 MW was added to the grid in FY 16-17. To promote the adoption of solar power, the state government announced its solar energy policy in 2014 to add 25,000 MW in Rajasthan. Net metering has been announced to promote rooftop generation. 

Rajasthan Renewable Energy Corporation Ltd (RREC) has issued a Letter of Award (LOA) for the Rooftop solar subsidy scheme to 119 bidders in 2019-20. The residential sector can only avail of Indian government social subsidiary schemes at their home or housing society.

The subsidy on the solar panels is as per the guidelines of MNRE. The government aims to achieve a cumulative capacity of 40 GW of Rooftop Solar projects for the country by the year 2022.

Uttar Pradesh

Although UP is still a developing state, it is facilitated well with high solar radiation. The future of solar power in UP is bright as the state is looking to set up solar parks in different parts of the state. UP stands 7th with the highest installed rooftop solar power generation capacity in India.  UP falls under the states of general category that gets up to 70% of the predetermined installation cost. 

How to Verify Authorized Vendors/Channel Partners by DISCOMS?

The Ujwal DISCOM Assurance is a government body that works with an intent to find a permanent solution to the financial mess regarding power distribution in India. This consists of all electricity distribution companies. You can visit different DISCOM websites and search authorized partners’ lists in your area and contact them. 

DISCOMS have listed down the name of the panel vendors through the bidding process and decided rates for setting up rooftop solar plants.

It has been noticed that many rooftop solar companies have set up rooftop solar plants by claiming that they have been authorized by the ministry. No vendors have been authorized by such a ministry. This scheme is being executed only by selected DISCOMS. The DISCOMS have selected vendors through the bidding process and have pre-decided rates for setting up a rooftop plant. 

The ministry informed that DISCOMS has followed an online process for this purpose. The residents who plan to set up a rooftop solar plant under the MNRE scheme can apply online and call vendors for the installation of rooftop plants.   

The ministry has also advised consumers to pay according to the rates decided by DISCOMS. They follow the instructions of higher authorities and have been instructed to identify and punish such vendors. It is because some vendors are charging more than the decided price which is completely unethical.   

The solar systems applicable for subsidy are the on-grid solar systems, hybrid solar systems, and solar water pumps. The subsidy percentage varies from state to state and the majority of states provide nearly 30% to 90% subsidy in India. These subsidies are for domestic use, social sectors, educational institutes, but not for commercial solar systems. Generally, it takes around 3 to 6 months to get the subsidy credited to your account. This solar system for home in India government subsidy is available across all the states of India. If you transition to solar power you will be able to access this benefit and equally contribute towards saving your environment. So, why not adapt to this new normal and help the government achieve its mission of generating electricity in the safest manner possible. We will help you take the step further. Feel free to contact us if you are planning to add a solar system on your rooftop or have any queries regarding solar systems.