cost of setting up a solar power plant

The solar power plant cost depends on how much electricity has to be generated to meet the given requirement, the quality of components used as well as the solar subsidy and incentives available. In one of our earlier posts, we shared solar power plant parts and functions. Here, we are sharing the structure of the cost of setting up a solar power plant or the cost percentage breakdown of solar component.

Cost Of Setting Up A Solar Power Plant

1. Cost contribution of solar panels (PV modules)

Solar panels constitute almost 50%-60% of the total solar power plant cost.

About the component

PV stands for Photo Voltaic. The Solar Panels uses silicon cell to convert energy from sunlight (photo) to electricity (voltage). Solar Panels account for almost 50 to 60% of the cost of Solar Power Plant, and it is critical that these are chosen with prudence.

Manufacturer’s Profile

With growing demand for Solar Panels, a lot of new manufacturers have come up in the market. While all of them claim to produce best quality solar panels, one should always look closely at their experience, the volume of solar panels sold, and financial health. The financial health of the manufacturer is key here, given the warranty on solar panels (25+ years), it is important that the company survives for at least the comparable duration, to be able to honour the warranty conditions in case of failures. Some manufacturers do offer insurance backed warranties that allow fulfilment of warranty conditions in event of the manufacturer closing down their business.


All commercially available PV Modules come with Product Warranty of 10 to 12 years (against manufacturing defect) and Power Output Warranty of 25 to 30 years. Power Output Warranty means the Output of Solar Panel under Standard Testing Conditions (in test facility) is assured to be above certain values/trend pre-defined by the OEM.

2. Solar Inverter

Solar Inverters constitute 10%-15% of the total solar power system cost.

About the component

Solar Inverters convert DC Power generated by Solar Panels into AC Power which can be used to power up your appliances and is compatible with grid-supplied electricity (voltage and frequency). The inverter also ensures that Solar Panels are generating maximum power possible under given sunlight conditions.

The Inverter is also capable of monitoring various parameters which indicate the health of the plant, allowing your solar power installer to analyse trends and performance of the solar plant. The most important task of an inverter, however, is to produce AC power of right voltage and frequency, as well as synchronize with the grid-supplied power for seamless usage of solar power being generated.

Manufacturer’s Profile

Solar Inverters are specialized products and a lot of Research, Development and Market Experience goes into producing these. It is therefore critical that the manufacturer is chosen based upon their Experience, Volume Produced and Quality Control. The Solar Inverter market has been dominated by European Manufacturer’s for long, as they are known for their quality and R&D. However, recently, many non-European manufacturers have also come up in the market, with a good track record.


Inverters typically come with a 5-year warranty, but most of the manufacturers let the user buy extended warranties, up to 20 years. Inverters are typically expected to last for 10+ years, but their operating life varies considerably upon site conditions, specifically with operating temperature (electronic circuits have a higher failure rate in higher temperatures) and quality of electricity supplied by the grid.

GERMI Reduces fixed cost of setting up a solar power plant – Indianext

3. Solar Panel Mounting Structure

solar power system cost

Mounting Structures constitute 5%-10% of the total solar plant cost.

About the component

The module mounting structure provides structural support to solar panels enabling them to face specific direction and inclination. The mounting structure is available in structural materials like Mild Steel, Galvanized Steel and Aluminium.


Typically, galvanized steel (with 80 µm thickness) and anodized aluminium are chosen for long life (30+ years), especially in sites with heavy rains, salty mist (near sea shore) or presence of corrosive vapours (near factories). Structure made of painted mild steel are typically used in drier places, where maintenance (scraping and re-painting) is possible.


A good design of mounting structure considers long-term operability, access to maintenance and cleaning of panels. The overall weight of structure should also be optimized, and wind-loading analysis is a must, to ensure safe operation during high winds.

4. Balance of System

The Balance of System (BoS) constitutes 5%-10% of the total cost of setting up a solar power plant in India.

The Balance of System includes Cables (AC and DC), Switchgears (MCB, RCCB, Isolators), Protection Devices (Fuses, Surge Protection, Lightning Protection) and Earthing Material (grounding conductor, rod, chemicals).


The cables should be selected for minimum acceptable voltage drop (typically <1% for DC side and <1.5% for AC side).

Protection Devices

Protection devices are necessary for safe operation of the solar power plant. Fuses help in limiting maximum current in the system, whereas the surge protection device protects the system from voltage surges (AC or DC). Lightning protection device diverts is critical to protecting solar power plant and connected electrical circuit from a lightning strike.

5. Design and Workmanship

Proper electrical design and workmanship of the solar power plant is by far the most important aspect, and thus it is important to select the installer of solar plant wisely. The proper plant design ensures that the components (solar panels, inverters, mounting structure, and balance of system), their ratings and the makes are selected considering the optimal performance of the plant. The quality of workmanship is also critical from safety and operability point of view.

What is solar power and why should you consider it?

Solar power systems are also called solar photovoltaic (PV) systems. They work by collecting solar energy in solar panels which are normally roof-mounted, but can be mounted on the ground. The solar energy collected is converted into alternate current (AC) with an inverter. While solar panels will only work during the daytime, battery storage units are available that allow the excess power to be used at night.


Solar power has been through three stages. Until about 2011, solar panels were expensive and the payback period was longer. After 2011, they started coming down in price and today, the price of solar panels has stabilised and is far more affordable than in the past.

Solar panels have also improved in efficiency and reliability. In the past, solar panels were expensive and most homeowners bought smaller systems up to 2kW. Today, a 5kW system is about the same price as a 2kW system was before 2011 and is a better system to have because it can account for most if not all of your energy requirements. To know more about what is solar energy read this.

How much does solar power cost?*

Today, the average cost of a 5kW system is around $6500, but it can be more expensive in some areas.  For example, in Darwin, a 5kW system costs around $11,000 while in Adelaide, it costs under $6000. In Sydney and Perth, solar power costs just over $5000 and in other states, it costs around $6000.

When you consider buying a 5kW solar system, you also need to think about the payback period. Average payback periods in different cities are around:

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  • 4.2 years in Adelaide
  • 4.7 years in Darwin
  • 4.8 years in Sydney and Perth
  • 5.4 years in Brisbane
  • 6.4 years in Canberra
  • 7.4 years in Melbourne
  • 8.2 years in Hobart

These figures take into account the cost of electricity in different areas and that is why Darwin, which has the highest costs has a low payback period. The average payback period in Australia is 5.8 years, but even at the highest payback period of 8.2 years in Hobart, solar panels are well worth investing in. It’s also worth noting that electricity prices rise steadily, so the payback period could even be shorter.

Estimates of households in Australia that already have solar power range from 1.5 million to 2.0 million. This number will probably increase in the future as the cost of electricity rises.

Many solar panels have warranty periods of up to 25 years, making them a wise investment considering their payback period of just 5.8 years on average.

How to get the right sized solar system

Solar panel systems are made up of several panels and the size of the system is based on the number of panels and the efficiency of the panels. Estimates vary because solar panels can be installed in areas where the sun rarely shines or in sunny areas. Solar panels can also be installed on roofs that have partial shade during the day, which decreases their efficiency. These are averages and your solar power installer can tell you how efficient your solar power will be in your area.

Solar power is measured in “self-consumption” which is an indication of how much energy you use during the day. These are some estimates of how much energy you will save for different energy consumption levels with a 5kW to 10kW system measured in kilowatt hours (KWh):

  • 5-10KWh will save 30 percent
  • 11-15KWh will save 48 percent
  • 21-25KWh will save 66 oercent
  • 31-40KWh will save up to 82 percent

It is possible to get a solar system that is too large for your household, but you don’t want to get a system that is too small for your household. Solar power retailers and installers can help you find the perfect system for your needs and a smaller system for a smaller household will cost less than a larger system.

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Why investing in a solar system battery is a good idea

The prices above are for solar panels only and a battery will cost more. A battery is a good investment because you are likely to be able to store energy in the battery during the day and have it to use at night. This will decrease your use of electricity from the grid and lower your electricity bills.

Solar batteries are a good choice, but you don’t want to buy a solar battery that is too small or too large for your solar panels. Sizing of batteries is based on average electricity usage and the size of the solar system you have. Batteries don’t just store enough energy to keep your house powered overnight. If you get the right sized battery it can give you “energy autonomy” for three to five days.


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Solar batteries cost between $2000 and $12,000, with the higher cost being batteries for large systems and a large battery can weigh up to 290kg while a smaller battery may weigh only 25 to 45kg. Even at the higher end of the scale, batteries have a payback period of three to five years and their warranties are far longer than their payback periods. Better batteries have a 10 year warranty and others may have a seven year warranty. Even at seven years, you still save money since the payback period is five years maximum.

It’s probably a good idea to buy lithium batteries because lithium batteries generally have 10 year warranties and are highly effective. They aren’t hard to find because about 80 percent of solar batteries on the market are lithium batteries.

Batteries with inverters and chargers can be more expensive than batteries only. A battery for an 8kW system may cost around $7700 while the same sized battery with an inverter/charger may cost around $11,800. These prices include the battery and installation costs. Most households don’t require an 8kW system, but this is an indication of the price differences. The key thing also to remember is to know how to keep solar panels clean to make them last. 

Choosing a solar panel supplier and installer

While state rebates have been phased out, government rebates are still available. “Rebates” take the form of Small Scale Technology Certificates (STCs) which vary in price depending on market conditions and other factors. In order to qualify for STCs, you must buy solar panels and batteries from a certified retailer who will offer a discount for the price of the STCs. This discount can be from $500 to $1000 depending on the system you buy and can represent a substantial savings.


Finding a certified solar panel supplier is fairly easy because most solar panel suppliers are certified. However, they also sell different products and you want to find good solar panels and batteries with long warranty periods.

It’s always best to get quotes from three solar panel suppliers and compare their services and products. They will give you supply and installation costs as well as the discount for STCs. Compare the prices carefully and choose a high quality system at the right price. Some other things to look for are:

  • Solar installers must be licensed
  • They should be fully insured
  • They should give you itemised quotes
  • Their warranty periods should be stated
  • Their products must meet Australian Standards

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