Returns model · 25-year view
1 MW Solar Power Plant Profit and Monthly Income
Last reviewed August 2026 · revenue, running costs, tax, 25-year model · every assumption stated
A 1 MW solar plant nets ₹44 lakh a year at a DISCOM feed-in tariff of ₹3.20 a unit, about ₹78 lakh under an open access PPA at ₹5.40, and about ₹1.15 crore where it displaces your own industrial tariff at ₹7.80. Over 25 years that is ₹8.7 crore, ₹16.8 crore or ₹25.5 crore of net cash on a plant costing ₹4 crore.
The plant does not determine the profit. The identity of the person consuming the unit does, and it changes the answer by a factor of nearly three.
Baseline on this page
A 1 MW plant at ₹4.05 crore, 16.6 lakh units in year one, 0.5% annual degradation, operating cost rising 5% a year, one inverter replacement in year twelve, land excluded and financing shown separately.
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The same plant, three businesses
One ₹4 crore plant, three completely different returns
All three columns are the identical 1 MW plant generating 16.6 lakh units in year one, after an O&M contract at ₹5.5 lakh a year. Nothing about the equipment differs. Only the buyer does.
DISCOM feed-in
₹3.20 a unit
Net a year after O&M
₹44 lakh
Net over 25 years
₹8.7 crore
A regulated tariff and a guaranteed buyer. Bankable, predictable, and only viable with cheap long-tenure debt. This is an infrastructure investment, not a cost saving.
Open access PPA
₹5.40 a unit
Net a year after O&M
₹78 lakh
Net over 25 years
₹16.8 crore
Below the consumer grid tariff and above the auction rate. Whether it clears depends on the open access charge stack in the state, not on the plant.
Your own HT tariff
₹7.80 a unit
Net a year after O&M
₹1.15 crore
Net over 25 years
₹25.5 crore
The highest-value unit available anywhere. The constraint is not money, it is how much of your consumption a daytime plant can actually reach.
Read these as scale, not as value
The 25-year figures are undiscounted sums of net cash, which is how the market quotes them and not how a financier reads them. Discount ₹8.7 crore of cash spread over 25 years at 10 per cent and it is worth about ₹4 crore today, which is the whole point of the payback conversation. The model below shows both.
Returns model
Twenty-five years, with the debt and the real running costs in it
Most published returns for a 1 MW plant use a flat first-year figure, the O&M contract price rather than full operating cost, and no debt. Change any of those and the answer moves substantially. Set the four inputs that actually matter.
Generation degrades 0.5 per cent a year, operating cost rises 5 per cent a year, the inverter is replaced in year twelve at ₹30 lakh, and debt is amortised over 12 years. Corporate tax and accelerated depreciation are excluded here and treated separately below, because they depend on income you may not have.
Operating cost
The ₹5.5 lakh figure is the O&M contract, not the running cost
Almost every published return for a 1 MW plant uses ₹5 to ₹6 lakh a year of O&M. That is the contract price for cleaning, vegetation and preventive maintenance. It is not what the plant costs to own.
| Cost | A year | Notes |
|---|---|---|
| O&M contract | ₹3.5–4.5 lakh | Module cleaning at the contracted frequency, vegetation control, preventive maintenance, breakdown response. |
| Insurance | ₹1.2–1.6 lakh | 0.3 to 0.4 per cent of asset value for all-risk plus business interruption. Lenders require it and will hold the assignment. |
| Site security | ₹1.8–2.4 lakh | Two guards on rotation. Not optional on a remote site: cable and module theft is the most common insurance claim. |
| Land lease, if leased | ₹1.1–2.7 lakh | 4.5 acres at ₹25,000 to ₹60,000 an acre with escalation. Zero if you own the land, but then the capital sits in it. |
| Water for cleaning | ₹30,000–60,000 | Six to twelve cleaning cycles a year. In a dry season with no borewell it becomes a tanker cost and a scheduling problem. |
| Statutory and audit | ₹50,000–1 lakh | SPV compliance, audit, professional tax, meter testing and calibration. |
| Inverter replacement provision | ₹2.5–3 lakh | A ₹30 lakh replacement around year twelve, provided for annually. Ignoring it does not make it go away. |
| Full operating cost | ₹11–14 lakh | Roughly double the figure most models use, and about a year of extra payback at a feed-in tariff. |
Where this shows up
On a ₹4 crore plant earning ₹49.6 lakh of revenue at a feed-in tariff, using ₹5.5 lakh of O&M instead of ₹11.5 lakh overstates net cash by 14 per cent and understates payback by about a year. At an industrial tariff the same error is a rounding difference. The thinner the margin, the more the operating cost assumption matters.
Risk to the return
Six things that quietly take the profit down
None of these appears in a vendor projection. Each one is ordinary, and two of them landing in the same year is what turns a comfortable model into a covenant conversation.
Payment cycles, not payment default
DISCOMs pay, eventually. Forty-five day terms running to 90 or 120 days is a working capital problem, not a credit loss, and it is the single most common cash surprise in the first two years.
Curtailment
Instructions to back down during low-demand periods. Whether you are compensated depends on the contract, and deemed generation clauses are worth reading before signing rather than after.
Policy change mid-life
Banking rules, wheeling charges and cross-subsidy surcharge are state policy on a 25-year asset. Model the return at current charges and again at worse ones before committing.
Soiling with no water
A dry season with an empty borewell means either tanker water or a five to eight per cent generation loss for a quarter. Both cost money; only one is budgeted.
Inverter downtime
A central inverter out for three weeks waiting on a board is 60,000 units. Spares holding and a contracted response time are worth more than a brand name.
Degradation off the warranty curve
Warranties are typically 0.5 per cent a year after a first-year step. Verify actual performance ratio annually against the curve, because a claim made in year eight on data you never collected is not a claim.
Tax
Accelerated depreciation is the only real incentive at this size
There is no capital subsidy for a 1 MW plant. What exists is 40 per cent depreciation on the written-down value, and it is worth a great deal to a company with taxable profits and nothing at all to one without.
| Year | Opening value | Depreciation at 40% | Tax saved |
|---|---|---|---|
| Year 1 | ₹4.05 cr | ₹1.62 cr | ~₹41 lakh |
| Year 2 | ₹2.43 cr | ₹97 lakh | ~₹24 lakh |
| Year 3 | ₹1.46 cr | ₹58 lakh | ~₹15 lakh |
| Year 4 | ₹87 lakh | ₹35 lakh | ~₹9 lakh |
| First four years | — | ₹3.12 cr | ~₹89 lakh |
Only if you have profits to shelter
A project SPV with no other income cannot use the shield in the year it arises. It carries forward, which is worth far less than ₹41 lakh in hand, and it is the most common reason the tax benefit in a vendor model never materialises.
Half-year rule applies
An asset commissioned in the second half of the financial year gets half the depreciation that year. Commissioning on 2 October instead of 28 September moves about ₹20 lakh of tax shield by a full year.
It is a timing benefit, not free money
Accelerated depreciation front-loads a deduction you would have taken anyway. The value is the time value of the money plus any rate arbitrage, which is real but smaller than the headline.
Indicative only, and not tax advice. Rates, the applicable regime and your own position decide the actual benefit — take it to your auditor before it goes into a model a lender will see. What subsidy and incentives actually apply at MW scale.
Against the alternatives
Honest comparison, including the cases where it loses
A solar plant is an operating business with land, receivables and equipment, not a passive yield product. Where it displaces your own expensive tariff it beats almost anything. Where it sells at a feed-in tariff, the comparison is much closer than the industry admits.
| Option | Return | Payback | What it demands |
|---|---|---|---|
| Solar, displacing your own HT tariff | 22–28% | 3–4 yrs | Land or roof, approvals, an operations relationship, and daytime consumption large enough to absorb the generation. |
| Solar, open access PPA | 14–18% | 5–6 yrs | All of the above plus a creditworthy consumer, open access registration and exposure to charge revisions. |
| Solar, DISCOM feed-in tariff | 8–11% | 9–12 yrs | All of the above, cheap long-tenure debt, and patience with a 90 to 120 day payment cycle. |
| Fixed deposit | 6.5–7.5% | — | Nothing. No land, no approvals, no operations, no offtake risk, and liquidity. |
| Commercial property, let out | 4–6% yield | — | Capital, tenant risk and illiquidity, with capital appreciation that solar does not offer. |
The question worth asking before the money question
Do you consume 16.5 lakh units a year in daytime hours at an HT tariff? If yes, a captive plant is one of the best returns available to an Indian business and the analysis is straightforward. If no, you are becoming a small independent power producer, and that is a different business with different skills, and returns that compete with bonds rather than with your electricity bill.
Where we fit, and where we do not
We build plants. We do not sell you a return
Blues Renewables works at MW scale as a subcontract EPC and balance-of-system contractor inside other developer projects, and as a turnkey contractor at the rooftop and ground-mount sizes we have built. We do not own plants, bid tenders or hold power purchase agreements, and we have no interest in your return being optimistic.
What we will check in your model, at no cost
- Whether the capex is inside the market band, and which line is off if it is not.
- Whether the generation figure implies a CUF the site can actually deliver.
- Whether the operating cost is the O&M contract or the real cost of ownership.
- Whether the tariff in the model is the tariff in a signed contract.
What we will tell you to get elsewhere
- Financial advice, tax planning or investment recommendations.
- A bankable DPR and a certified financial model.
- An independent energy yield assessment with P50 and P90.
- Open access registration or PPA negotiation.
Send us the projection someone gave you
The quickest useful thing we do is read a vendor projection line by line and tell you which assumptions will not survive a lender or a first year of operation. It takes us an hour and costs nothing.
The two numbers we most often find wrong are the CUF, which is quoted at 21 per cent for a site that delivers 19, and the operating cost, which is quoted as the O&M contract and treated as the full cost of ownership.
1 MW plant returns, answered
What is the profit from a 1 MW solar power plant?
Between ₹44 lakh and ₹1.15 crore a year after the operations and maintenance contract, depending entirely on what the unit is worth to whoever consumes it. At a DISCOM feed-in tariff of ₹3.20 a unit the net is about ₹44 lakh a year; under an open access power purchase agreement at ₹5.40 it is about ₹78 lakh; displacing your own HT tariff at ₹7.80 it is about ₹1.15 crore. The plant is identical in all three cases and costs about ₹4 crore.
What is the income from a 1 MW solar power plant per month?
About ₹4.1 lakh a month at a ₹3.20 feed-in tariff, ₹7 lakh at ₹5.40 and ₹10 lakh where it displaces an industrial tariff of ₹7.80. Those are averages, not monthly reality: February to May generate 20 to 30 per cent above the mean and the monsoon months 25 to 35 per cent below it. A monthly cash flow model that uses one twelfth of the annual figure will show a deficit in October that does not exist and a surplus in March that is understated.
What is the payback period for a 1 MW solar plant?
Under four years where the plant displaces your own industrial tariff, five to six years under a healthy open access PPA, and nine to twelve years selling to a DISCOM at a feed-in tariff. Those are simple paybacks on unlevered cost. With 70 per cent debt the equity payback is shorter but the cash is thinner during the loan tenor, because debt service takes most of the operating surplus for the first ten to twelve years.
What is the real 25-year profit on a 1 MW plant?
About ₹8.7 crore at a flat ₹3.20 feed-in tariff, ₹16.8 crore at ₹5.40 and ₹25.5 crore against a ₹7.80 industrial tariff, all after operations, maintenance and one inverter replacement, on a plant costing about ₹4 crore. Those figures assume 0.5 per cent annual degradation, operating costs rising five per cent a year, and no tariff escalation. They are undiscounted totals, so treat them as scale rather than as value.
What running costs do people forget?
Insurance, security, land lease, water for module cleaning, statutory and audit costs for the project company, meter testing, and a provision for inverter replacement around year twelve. The ₹5.5 lakh per MW figure quoted almost everywhere is the O&M contract alone. Full operating cost for a 1 MW ground-mount plant is ₹9 to ₹14 lakh a year, which changes payback by roughly a year at a feed-in tariff.
Does accelerated depreciation change the return?
Substantially, if you already have taxable profits. Solar assets attract 40 per cent depreciation on the written-down value, so a ₹4.05 crore plant generates about ₹1.62 crore of depreciation in year one, worth roughly ₹41 lakh of tax saved at a 25 per cent effective rate, and another ₹24 lakh in year two. A special purpose vehicle with no other income cannot use the shield in the year it arises; it carries forward, which is worth far less.
Is a 1 MW solar plant better than a fixed deposit?
They are not the same kind of thing. A fixed deposit at 7 per cent needs no land, no approvals, no operations and no offtake risk. A solar plant displacing your own industrial tariff returns the equivalent of 22 to 28 per cent pre-tax and is an operating business with land, a DISCOM relationship, receivables and equipment to maintain. Selling to a DISCOM at a feed-in tariff returns 8 to 11 per cent, which is a much less obvious trade against a deposit or a bond.
What can erode the profit after commissioning?
Payment delays from the offtaker, curtailment instructions during low-demand periods, a change in banking or wheeling rules where you sell under open access, soiling losses in a dry season with no water available for cleaning, inverter downtime with slow spares, and degradation running faster than the warranty curve. None of these is dramatic on its own; two together in the same year can turn a comfortable coverage ratio into a covenant breach.