Rooftop solar power plants can help MSMEs reduce costs, while also contributing to sustainability.

India's significant and continued economic growth has led to an increase in demand for power resources. One of the most looked-for ways to address this demand is the use of alternative energy sources, particularly renewable energy sources like solar which will also improve energy security for industry.

Key to this growth have been MSMEs (medium, small and micro enterprises). According to the 2017-18 annual report of the ministry of MSME, such enterprises accounted for 29 per cent of the country's GDP (gross domestic product) and created 111 million jobs. According to a Deloitte report published in April this year, most MSMEs spent between 5 per cent and 20 per cent of their operating income on electricity. This, of course, varies with the nature of industry and cost composition of the other raw materials.

The Indian government has recognised this need and executed several plans to encourage renewable energy solutions among MSMEs and large industries. Under its National Solar Mission (NSM), the government of India has set an ambitious target of 100 GW of solar power capacity by 2022, and out of this 40 GW has been allocated to rooftop solar. Aligning with this mission, most states in the country have implemented dedicated solar policies and net metering regulations to enable the growth of on-grid rooftop solar systems among businesses. In India, rooftop solar power generation in commercial and industrial facilities is a financially viable opportunity which is yet to be explored to its full potential.

If we do the calculations, a commercial property which pays around 10 per unit of power, having a rooftop solar power plant can generate 150 per sq ft of revenue, which is almost 20 per cent of the rental yield that most of commercial spaces get annually. This can be achieved utilising a vacant space which otherwise has no commercial use. When it comes to industrial customers who pay a tariff of approximately 7-8 per unit, they themselves can generate around 105-120 per sq ft through a rooftop solar power plant.

On the other hand, the grid power costs in India are expected to escalate by 5 per cent year on year (YoY). Moreover, accessibility of grid power is challenging at some places, resulting in higher usage of diesel generators which leads in turn to increased energy costs.

Some benefits of on-site solar power generation facilities:

  •     Utilisation of unused space: Companies can use commercially unutilised roofs to generate electricity at a lower tariff with a payback of 2.5-3.5 years depending on the tariff of a discom. 

  •      Accelerated depreciation tax benefit: According to central government policies, investment (Capex) in solar power plants is eligible for an accelerated tax depreciation of 60 per cent. This means that you can allow 60 per cent of the total project cost as depreciation in the first year, and 40 per cent of the remaining project cost in the subsequent years.