Is a solar farm actually profitable in India? An honest answer
Published payback figures range from 3 to 10 years. Here’s the real model.
Search this question and you’ll find payback claims of anywhere from 3 to 10 years and IRRs from 12% to 28% — because most are written by sellers. The honest answer: a well-sited Gujarat plant is profitable, but the returns depend entirely on tariff, CUF, financing and execution. Here is how to model it without the optimism.
The revenue side
At a 19–21% CUF, 1 MW in Gujarat generates ~14–17 lakh units a year. Under a DREBP PPA at ₹2.76/unit that is roughly ₹40–47 lakh/MW/year; via open access at higher realisation, more. The tariff is fixed for 25 years, so revenue erodes only with degradation (~0.4–0.8%/yr).
The cost side
Capex ₹3.0–4.5 crore/MW; real O&M ₹2.5–4 lakh/MW/year (not the ₹5–8 lakh EPCs quote); plus inverter replacement (~₹10–20 lakh/MW reserve), insurance, land lease and security. The 40% accelerated-depreciation benefit creates a large year-1 tax shield that materially improves equity IRR.