Elon Musk actually mentioned once that if he is given a small area in Nevada he will be able to power the entire United States if you wanted to power the entire United States to the solar panels it would take a fairly small corner of Nevada you only need about 100 miles by 100 miles of solar panels it’s proud of the entire United States Modi G always.
Says that Indian families can make money out of solar and it will act as a passive income India will be the third largest economy soon how can an Indian family make passive income with solar panels so if your family needs 300 units of power you can put up a power plant that produces the 300 units of power such that your bill.
Becomes zero so you mentioned that the government is extremely bullish with solar and can you tell me government schemes how is the Modi government trying to make solar viable in India and how is that going to have a lasting impact on the payback period of 3 to 5.
Years today China controls 80% of the world solar panel Supply and every country is looking at a China plus one sourcing strategy nobody wants to be dependent on China today what is the cause difference between an Indian solar panel versus a Chinese solar panel so there is a significant cost difference these hotpots can heat up so much that.
It can actually also lead to a fire risk right fire risk and a fire can be caught up in your solar system and innocent families who have never bought a solar for themselves they can make the wrong sort of mistakes two things that disappoint me are number one even though we are sitting on something more valuable than oil we think yeah solar.
Not a big deal and secondly the investor Community is extremely bullish on solar but they don’t speak about it much probably they’re hiding their you know in the business whe they say that if you want to make a lot of money it’s not made in flashy businesses like a restaurant or a movie it’s actually.
Made in the most boring businesses that you can think of and the solar sector is one such sector which may appear boring but this sector has huge gaps where you can build a business very very quickly especially in India and this episode is a conversation that we had with the founder of a wonderful company called solar square and Shrea gave me a.
Complete breakdown on how to find gaps in the Solar Market what is the economics of the solar industry as a consumer how much investment do you need to make in solar panels how to make your electricity bills go to zero and even the Indochina tensions in the Solar industry and this tension by the way can bring you cruo profits if you know where.
To tap in the Solar sector in fact solar square has tapped into one of these gaps which has turned it into a 100 CR company for those who don’t know solar square is a residential rooftop Solar Company and they’ve built this business over the past past 9 years so what you’re about to listen to is 9 years of wisdom put in just 90 minutes and I just.
Hope you learn something valuable from this episode Elon Musk actually mentioned once that if he’s given a small area in Nevada he will be able to power the entire United States and when I had a look at that real I was mind blown I was so mind blown that I actually fact checked and then I read about.
International solar Alliance only to understand that we’ve been blessed with more sunlight than perhaps any other country on this planet which gives us unlimited access to energy and yet two things that disappoint me are number one even though we are sitting on something more valuable than oil we think yeah solar not a big deal and secondly the.
Investor Community is extremely bullish on solar but they don’t speak about it much probably they’re hiding their treasured knowledge so today in this podcast I want to UNC the deepest secrets of solar energy so that people understand what kind of an amazing Revolution this is and more importantly I always say that you know the.
Government is the Godfather of the market so just like The Godfather if the Godfather loves you no matter how small you are you will go on to become big and if the Godfather doesn’t like you no matter how big you are you’ll be down to ashes and The Godfather as of today absolutely loves solar so which is why I want to go.
Deeper and understand that’s the agenda for today’s podcast if you can also throw light on the businesses that people could start in this sector that would be amazing because I know for a fact that this is going to be the next big thing because this is literally India’s opportunity at something more valuable than oil does that make sense.
Absolutely makes sense and and I think you said that India is blessed I think there are every country has a few disproportionate advantages and unfair advantages I think solar the amount of sunshine India gets uh nobody ever thought much of it that it’ll One Day become that unfair Advantage but absolutely in the wake of the solar.
Revolution the amount of sunshine we get is an unfair Vantage that our country will by the way be reaping in a big big way can you put this to numbers because all of us know that India gets an enormous amount of sunlight but very few people understand what we can do with that sunlight and how is that a treasure so uh solar square is a residential.
Solar Company so let’s look at this unfair advantage of amount of sunshine in India from the context of a homeowner a homeowner who’s putting a rooftop solar system on his for his family to power his home his air conditioner appliances Etc right now India gets 300 days of sun it’s one of those few countries that get that amount of sun.
And even though some people in this audience may feel bangal actually India is a tropical country where from ladak to kanyakumari from Northeast to West everywhere India gets sufficient amount of sun that any place in India produces more power than an average Place elsewhere you know uh.
In most other parts of the world now let’s look at Germany Germany May 12% homes have solar one in every eight homes has already adopted solar in Germany Germany uh does not get this much amount of sun in fact for the last 2 to 3 months of the year uh towards the colder parts of winter Germany hardly produces you know the solar systems.
Don’t produce much power right so let’s put it in numbers one kilowatt of rooftop solar in Germany will produce a th000 units of power per year the same 1 kilowatt of solar in India will produce roughly 1,400 units of power per year so we get 40% more power from the same capital investment that we do in that 1 kilowatt solar right so that’s one.
Unfair advantage of India that we produce just lot more power similarly we produce more power even even in the US where already 5% homes have solar or uh you know a little bit more than even Australia where already 35% homes have adopted solar right Visa in India despite generating so much more power only 1% Indian homes have so far adopted.
Solar so India has roughly 10 CR Urban independent homes and of these Urban independent homes only 10 lakh that is 1% homes have adopted solar so it is definitely a vast untapped uh you know potential that homes in India can uh can adopt and can you know save big through so why is our penetration so low right so I think every country has had a.
Journey of solar Revolution the revolution in the US started about 10 years back revolution in Germany started about 5 years back the German or the European solar Revolution was actually accelerated with the gas sanctions that Russia put okay so peak in the peak of winter Russia put gas sanctions on countries like Germany where all the.
Houses were cooling were heating their homes during Peak winter where it would snow heating is a very very big Power guzzler but homes were being heated through gas-based heaters when the gas sanctions were put on Germany people had to switch to using electricity for heating their homes and that led to very very high increase in electricity bills.
For these families and that is when the German Solar Revolution really got accelerated so much so that in 2023 after the Ukraine Russia war and once these gas sanctions were put German households put as much solar in one year as was put in the 10 years before right so that is how the acceleration in uh Germany happened in us it was through a.
Lot of policy support and then of course Sunny States like California adopted a lot of solar now let’s look at India now in India the residential solar Revolution is starting as we speak the commercial solar Revolution ganes is already quite big so every large commercial you know business public listed companies everybody is already.
Adopting solar and all businessmen in India know you know if you have a factory warehouse School College you should put up solar because commercial electricity rates are also high and in commercial establishment solar is of a bigger size it’ll be 50 kilowatt 100 kilowatt even 1,000 kilowatt if you know you’re a Johnson and Johnson Factory or.
You’re a large Automotive Factory Etc uh so the economics of solar was good for commercial establishment since 20145 so there has been no subsidy in India for commercial solar since 2013 but the economics of solar is such that if you are looking at a large you know 50 100 kilowatt power plant for your factory or School College any commercial.
Establishment you would break even the payback period would come in 3 to 5 years right 3 to 5 years 3 to 5 years and solar as a asset produces 25 years of free electricity so onetime investment you recover all your investment in 3 to 5 years and then you have 22 to 20 years of free electricity so the economic case was obvious.
Also businesses corporates they are used to of making Capital Investments right they are used to of investing in infrastructure used of investing in factories Etc and also electricity is like a cost of doing business right so everybody wants to improve their bottom line so they were adopting solar it was.
Well understood investing lacks and crores into buying solar was just like investing in any other asset right so the consumer adoption in commercial was easier because commercial you know customers understand buying equip infrastructure Etc solar is rooftop solar is nothing but a tiny power plant right you are literally powering your.
Whatever your building is through solar now let’s look at the consumer side of things right so the economics as early as 2015 it would take eight years for a home to get a payback on their solar investment because cost of solar was a little higher at that time and cost of electricity is usually lower for the.
Residential segment right so the payback was 8 years now if you are a middle class family something with an 8year payback m it’s good but you don’t have that kind of a horizon right corre uh but cut to 2021 the payback for a home came under 5 years because the cost of solar between 2015 to through 2021 crashed almost 40.
50% in the same period because of inflation all of our electricity comes from coal India has the dirtiest Grid in the world with maximum contribution of coal and coal as we all know is the most polluting source of power right so and coal is not getting cheaper right we have only a few more decades of coal left in the world anyway so it’s only.
Getting expensive we are also importing a lot of coal so it adds to our fiscal deficit it adds to inflation it adds to geopolitical Reliance right you do not want to be in a situation that very much like gas was you know restricted from Germany by by Russia you don’t want a situation where somebody can hold you to ransom for coal right so now in the wake.
Of the new cost of solar and the increasing cost of coal electricity solar is the new oil solar is the new coal it is the cheapest source of power for anybody whether you are a homeowner looking at six panels or you are a large corporate looking at thousands of panels on your rooftop right and so now the residential solar Revolution is starting.
So it started about four five years back that the economics was good paybacks came under 5 years however customer education still takes time like I said mankind has never bought a PO plant for themselves right your and my dad don’t know what to look for when buying a source of electricity for their family so every family is a first-time buyer.
The Upfront investment goes from you know starts from 2 lakh rupees could go as high as 5 6 7 lakh rupees depending on how large a home you have and how many solar panels you need right so high upfront investment low consumer awareness uh I think those are the reasons why we are still at 1% okay but that’s going to change very very soon.
Now what is the payback period as of 2024 right so as of 2024 the payback period for solar for a homeowner will be anywhere between 3 to 5 years 3 to 5 years so States like Maharashtra where electricity per unit costs about 12 bucks it’s more than the cost of a small blery bottle for one unit of electricity so state of Maharashtra has the most.
Expensive electricity where the payback will be as low as 3 years years other states will have typically 7 and a half to 9 rupees of electricity where the payback would be between four to 5 years so you mentioned that the government is extremely bullish with solar and can you tell me government schemes how is the Modi government trying to make solar.
Viable in India and how is that going to have a lasting impact on this payback period of 3 to 5 years right so I think the I think government of India has been extremely smart and thoughtful about how the residential solar uh you know boost is being given to the industry like you said when The Godfather wants something to happen it more often than not does.
Happen and India is very very big on solar and that’s not for any political reason I think it’s very India first that our government is putting solar at the Forefront like earlier coal and oil used to be a sign of energy Independence that you’re not dependent on other countries especially in the wake of all the geopolitical crisis that’s happening.
Solar is the new definition of energy Independence like I said solar is the new oil right so one we want energy Independence two we are heavily dependent on Imports for oil and coal and hence we want to reduce that and that’s why there is so much boost in India for domestic manufacturing as well to put up solar panel manufacturing.
Facilities in India right today China controls 80% of the world solar panel Supply and every country is looking at a China plus one sourcing strategy nobody wants to be dependent on China and hence it’s a great opportunity for India Vietnam Thailand all of these countries are investing big time into solar panel manufacturing right so I think that’s.
The SEC the you know the the second important thing the third important thing is that solar is the cheapest source of electricity available so I’m again going to delve into some numbers very very quickly yeah the cost of producing power from a new solar power plant with these new panel prices is just 2 to 2.5 rupees per unit these are.
Large power plants large utility scale power plants Visa the cost of producing power from a thermal or a coal based power plant is actually 5 rupees so so solar is now half of the cost of producing power from coal now if you add batteries with solar one problem with solar is that it you can’t control when a solar power solar plant produces power.
Right it produces power during Sunshine hours doesn’t produce our dur power during Sunset hours right so solar Plus Battery even if you were to add battery to you know add resilience and add storage to the solar power plants even that is like four bucks right so that is still cheaper than coal-based electricity and hence all all of the new.
Power that is going to come not just in India but everywhere in the world is going to be from solar in the last 5 years if you add all of the new Power capacity added by the world from all sources of power on one end one end add hydrothermal uh you know uh nuclear all sources of power at one end and take solar at the other end more solar power.
Was added than all other sources of power combined so it’s pretty much the future and India recognizes that and we have the unfair advantage of the sun okay now the solar Revolution is actually a supposed to be a distributed solar Revolution right there are centralized sources of power you put up like you said 6,000 foot of land if you.
Had if you had that luxury and you could put up power there it would still be expensive because you are producing power at one point and then you have to distribute it through thousands of kilometers right the one of the biggest problems the whole world is grappling with the grid the electricity grid which is such a complex massive piece of.
Infrastructure 50 years back it was a phenomena right it was one of the greatest pieces of infrastructure today it is a failing vulnerable very very problematic piece of infrastructure right our so our grid is old and aging okay first let’s define the grid power right okay so let’s talk about the.
Grid now why is the grid so problematic in fact I’ve also seen all the discoms in such a terrible State because of energy inefficiency that now simply because of those INE efficiencies they are now struggling with thousands and thousands of crores of debt and losses abut so it’s a national problem so why does India have this electricity problem.
Due to the grid yeah so by the way the grid is an ailing and vulnerable piece of infrastructure not just for India but for every developed country also from us to Japan it is a problem everywhere 50 years back a certain infrastructure was built which assumed a certain amount of power consumption in homes and factories and agricultural land right as.
Civilization has evolved as appliances have evolved as lifestyle has evolved as technology has played such a central role the infrastructure that was built for a family to consume you know maybe at that time it was consuming 25 units of power somebody built it for 200 units of power today there are homes that are consuming thousands of units of power in.
A month so the infrastructure itself is not sufficient for the new reality the of the world now most pieces of infrastructure right Railway you know that has to be upgraded sooner or later uh similarly the grid infrastructure also actually needs an upgrade but it is so expensive to upgrade the grid infrastructure number one two discoms.
Everywhere in the world are loss making right everywhere almost every discom everywhere in the world is actually loss making okay sh just a second discom Define simple words sure sure so disom is basically nothing but a Distribution Company from where you get your electricity so they bu buy power from the power plants then they manage the.
Distribution of power to the last mile to homes factories offices Etc and they basically monetize this distribution management bill collection that’s their that’s their business model right because the grid is a very very ailing piece of infrastructure as we all know uh strong winds a tree falls your grid is the first to go down right or the.
Wires are the first to get collapsed they’re also a safety hazard right so it’s a it was a great piece of infrastructure 50 years back it is very very ailing and vulnerable today because extreme weather phenomena is more and more common India used to have one cyclone in 10 years we are now seeing two Cyclones per year right or heavy you.
Know extreme weather phenomena like heavy winds has become very very common so it’s a physical piece of AR architecture or infrastructure which is very very vulnerable to extreme weather phenomena which is vulnerable to increasing power consumption in homes and it’s not the cables that were laid down under the ground were not designed.
For a family to consume the kind of power that the family is consuming today but upgrading it is very very expensive and it’s a massive massive project right so that is why the whole world wants to reduce its Reliance on the grid and move to more decentralized power sources right so imagine if you could produce your power and consume it at the same.
Point there was no distribution involved so enter solar right a rooftop solar is a decentralized or a distributed energy ecosystem right where every home will have its own tiny PA plant and it’ll power the entire home through that uh rooftop solar this is very interesting share and um like I said because of these government subsidies what are the.
Biggest government subsidies that that Modi government is giving out to the consumers to reduce their cost of solar absolutely so uh I thought we got you know we went very very far off your original question was what is the government doing to accelerate the adoption of solar so let’s now discuss about what is the government doing to.
Promote adoption of solar amongst homes because solar is so good for the economy and the country and of course for our environment it doesn’t make noise it doesn’t create any pollution India wants to promote a lot of residential solar right now the residential um solar I think it consumes about 20 25% of the country’s uh entire power requirement.
Comes from the residential solar segment now let’s look at the residential solar um Revolution right so the first thing that India has done is made the policy climate very very stable now what does a family need to adopt solar there is of course the subsidy which is encouraging families to go solar and India has launched the pranant surar scheme as.
Part of which you can get up to 78,000 rupees in subsidy for a family to go solar this is a direct benefit transfer you don’t have to wait for months and years to get this subsidy uh India has developed a beautiful it infrastructure it is called the national solar portal which goes by the name PM sugar. gov.in you can apply for solar on this portal.
Uh as a Solar Company we make all the applications all the government permits of solar through this National solar portal uh and then for subsidy we upload the Consumers Bank details in the National solar portal and within 30 days of a customer solar being installed and ready consumers get subsidy in their bank account $70,000 R 78,000 rupes in.
Your bank account within 30 days uh in fact we are hearing that it’s going to get even faster we have customers who get this subsidy within a week’s time uh but uh this is actually a great piece of because see this is such a consumer to Consumer Revolution right without the power of Technology without a solid it infrastructure that enables homes to.
Apply for solar to get their permits to get their subsidy this can’t happen right and India is a complex country we have 73 discoms across our states in territories every discom has its own it system right and to for a home so let’s let’s actually talk about what what are the what are the permits a family needs uh you know to go solar so to go solar.
You need something to you take benefit of something called net metering now what is net metering uh we spoke about solar producing power only during Sunshine hours so now if I have a rooftop solar on my home what happens at Sunset how do I Power my home at Sunset right so so India has a there is a policy called net metering as part of.
Which you are your solar system is connected to the grid now what happens is during the sunshine hours you’ll produce all the power that your home needs through the 24 hours of the day whatever your family is consuming instantaneously maybe the lady of the house is at home you’re running some appliances you take that power.
Instantaneously from solar to your home the Excess power is pushed into the grid post sunset when the kids come back you know the the the other family members come back home you need more power you’re running air conditioners at night Etc the the power that you sent into the grid during the day is taken back from the Grid at night this exchange of.
Electricity is called net metering so in a month let’s say you sent 100 units to the grid and took back 100 units your Net bill will be zero so that is how you are powering your home throughout the day with solar but technically the electrons you know some are consumed instantaneously some are pushed into the grid some are taken back from the grid.
So this is where grid still plays a role because for net metering you actually need to use the grid now if net metering was not there Ganesh every family would have to invest in a battery which would add another 20 30% into your initial investment right and so in a way government is saying the grid is your free battery right and through net.
Metering families are able to power their homes throughout the day also it reduces the pressure on the grid because now there are a lot of decentralized power production sources there’s not as much demand pressure there is there is more augmentation of electricity into the grid through these distributed solar systems sh Modi G has often said and.
This is the reason why the PM solar scheme became extremely popular Modi G always says that Indian families can make money out of solar and it will act as a passive income how can an Indian family make passive income with solar panels right so right now solar you can save money with solar you can make your electricity bill zero with solar so if.
Your family needs 300 units of power you can put up a power plant that produces this 300 units of power such that your bill becomes zero but can you put up a power plant that produces 500 units of power sell the EXs 200 and make money with it actually not today while Modi G has been saying it India only encourages at the ground level at The Last Mile.
Captive consumption which means a power plant should be designed such that it produces sufficient power to power your family’s requirement anything excess actually lapses which means that Excess power so if you let’s say make 500 units but in the year you know you made 500 every month but you only consumed 300 every month so you had excess 200 units.
Per month in a 12- Monon window you had 2400 excess units you’ll actually not get the right Roi for that selling that 2400 excess units technically the grid will pay you for it but they pay you at a very very nominal rate of 2 2.5 2.7 rupees so that’s not viable when you put up solar for captive consumption let’s say your electricity is for 8 rupees.
When you’re doing taking the benefit of net metering you’re actually getting the benefit of full 8 rupees that’s how the payback of solar comes at 3 years or four years or 5 years but if you’re only getting 2 rupes the economics won’t make sense however there is a future in which government May encourage families to put up as much solar as their roof space.
Allows and actually become sellers of power so today we are producers of power and consumers of power but we are not able to make money extra money through solar countries like us Germany Netherlands New Zealand Australia all of these countries do actually have a provision where families can sell Excess power and make money with solar so it is.
Obvious that as the solar re Evolution evolves and as more and more I mean as a country we need more and more power government will likely encourage families to use maximum rooftop space and put up maximum solar and sell whatever excess they they can produce got it so when do you think that will be possible so India is a fast growing.
Country uh and any country that is growing fast naturally with growth power consumption also grows so as a country our power consumption is growing at 8 to 9% per year right there is not enough coal and infrastructure to grow at that pace now 8 to 9% is the country’s growth of power consumption if you look at the middle class residential families with.
GDP growth with growth of Lifestyle more Electronics EVS coming in with massive heat waves India is going to need so many air conditioners we are one of the lowest penetrated country when it comes to air conditioners only 6 7% Indian families have air conditioners but we are the worst impacted by heat waves so the penetration of air conditioners is.
Going to double in the next four years double it’s going to double in India so if you look at any air conditioner company all of their growth targets you know are very very aggressive because India is going to be a massive power a massive air conditioner by you know growth country and air conditioners are one of the biggest power guzzlers air.
Conditioners and electric vehicles both of which are going to be more and more coming into families and homes with that the middle class residential power consumption is actually going to grow at the pace of 14 15% year on year which means every 7even years a family’s power consumption will double right with growing air conditioners EVS lifestyle.
GDP growth Etc all of that right now as the country needs more and more power requirement distributed solar is going to be an easy way to encourage more and more you know power power uh production in the country right so I do expect a future where India will allow families to make money by selling solar that however is not possible today got it so.
You’re saying that right now it’s not possible but in the future as the GDP goes up as the consumption per capita goes up we will have policies in place which will then help us put up as much solar panels as possible because of which eventually there’ll be a surplus of power that every family will produce eventually they’ll be able to make money.
Is that correct absolutely so out of all the business case studies that I have done the one Bott L that I often encounter is China China PM China China international Solari China China is the most dominating force and they are literally controlling the.
Entire world’s solar energy by the neck question let’s understand the value chain of solar and let’s understand where exactly is China dominating so that the entrepreneurs of India understand that here’s where the opportunity lies because I know for a fact that like I said The Godfather is extremely bullish with solar this is.
Where India’s oil is and if we understand the opportunities that exist in the Solar sector there could be a large segment of entrepreneurs who can work towards it and help us achieve the Milestone that we’re trying to achieve so let’s break down the value chain of solar and understand where exactly is China acting as a bottleneck sure so.
Let’s look at the full value chain of solar panels and then we look at inverters everything else I think you can make locally for example module mounting structures solar Square makes its own cables and you know switch gear all of that other stuff is in India right so let’s just first focus on the panels which is the heart of the rooftop.
Solar system right so solar panels the value chain starts from polysilicon which is the raw material the base raw material that then gets converted to Ingot Ingot get gets converted to wafer wafer to solar cell and then the solar cell is used to assemble the whole solar panel which is a 2 m by 1 M roughly a plate which will typically be a 500 600.
Watt Peak uh that’s the amount of power one solar panel will produce right now China uh has invested big time into solar manufacturing capacity because now everybody wants to Corner power sources right any country which Corners a power source becomes a global superpower and China saw that solar will be the future of power consumption and production.
Everywhere in the world and so for the last decades they’ve been investing big time into solar manufacturing capacity so up till solar um wafer China controls more than 90 95% of the world’s Supply when it comes down to solar panel the final finished good they are still controlling about 80% of the world Supply 80% absolutely but because most.
Countries are realizing the importance of solar in energy Independence most countries have started putting either sanctions or import duties on China India also used to import heavily from China however few years ago India introduced 40% basic custom duty on solar panels which was not there a decade back right so India is supporting.
Indian manufacturers by applying duties on Chinese Imports and also giving production linked incentives to domestic manufacturers so it is a chicken and egg problem right once there is enough demand from Indian manufacturers they’ll invest in larger capacities the larger capacities they invest in the more competitive they get to Chinese prices.
It’s as simple as that so the government has to basically for the short-term support Indian manufacturers such that they invest more in more in capacity and they are able to compete with the Chinese prices right and that is where custom duties have been applied in India Europe and us have gone one step ahead and they’ve put sanctions on China so.
Europe and us are actually importing panels not from China but from from India Vietnam Singapore Thailand Etc so it is also a great opportunity for India to ramp up capacity not just for domestic solar panel requirements but also for exports got it got it sh today what is the cost difference between an Indian solar panel versus a Chinese.
Solar panel absolutely so there is a significant cost difference if you are importing a panel from China currently the cost of that panel will be 13 to 14 rupees per watt right uh sometimes it can also go even lower for example year end Chinese New Year there is sometimes dumping of you know year end capacity so it can also go down to a little bit.
Lower than that but 12 to 13 rupees if that is the cost landed for an imported solar panel post all all of Duties the Made in India panels will be in the 21 22 23 rupees per water range right so you’re telling me that after applying 40% Duty a Chinese solar panel is costing about 14 rupees yeah an Indian solar panel without duty is costing 21.
To 22 rupees yeah absolutely and unfortunately the Chinese price have actually very little to do with cost of production China has incentivized the manufacturing there so heavily and they are trying to and by the way there’s another sort of massive reason here so China invested in 1,000 gaw of solar panel manufacturing capacity so so India.
Comparatively has only 50 to 80 gaw of solar panel manufacturing now compared to 1,000 gaw of manufacturing capacity can you guess the world’s demand for solar panels it’s 500 gaw so it’s actually half China has more capacity than the world’s demand combined right world’s demand for solar for solar panel yes so China has put up more capacity so.
There is currently a situation of over capacity where a lot of small Chinese manufacturers are actually dying and the large ones are basically just waiting it out waiting their time for the other small ones to die uh and So currently the prices have completely crashed from China so these prices that we see today from imported solar panels they’re.
Actually not sustainable they’re actually not for the Chinese not sustainable even for the Chinese right so they are actually artificially deflated prices for imported solar panels uh and it is only a short-term phenomena I expect the prices to go back up as you know the manufacturing capacities in China come more in line.
With the world’s Demand right and China is further strained out because Europe and us have put sanctions on imports from China right so all the more the capacity that they have they’re not able to sell because the world’s largest buyers which is countries like Germany and us are no longer buying from China plus now there is Trump who hates China.
Who hates China so today if the cost of solar panels is 24 rupes in India when can we okay 22 rupes in India when can we expect it to go down to 1213 is it even possible right so I think 12 and 13 like I said is artificial prices that’s primarily because of more Supply less demand and over capacity in China plus.
The trade sanctions and lots of other phenomena uh a sustainable price is one that can justify the cost of manufacturing and the fair profit margins that any industry has to make and hence I believe there is you know a time where you know Indian panel prices will also come down a little bit um maybe 18 rupees 19 rupees and I think.
They’ll come closer and closer to China uh the Gap like I said Indian module manufacturing capacity is at 50 to 80 gaws it’s expected to cross 100 gaws in the coming 2 years but it is still far far away from the th000 gaw capacity uh that China has got it do you think there’ll be a time when India will get free electricity due to solar energy.
Right so is are you saying that is there a future where every household in India is powered by rooftop solar I think it’s a consumer adoption problem right uh and there are certain hurdles to that adoption right I think slowly slowly as consumer awareness is increasing from 1% of like I said 10 CR Urban independent homes in India out of that 10 lakh have.
Adopted solar uh is there a future where 3 four five crores out of these 10 CR homes will have solar absolutely I believe in a future where solar will be ubiquitous every home very much like it has a television colored television and a refrigerator will also have rooftop solar however the adoption will take you know a few years and the schemes like.
Pradhanmantri surar yoga are definitely helping Aid and accelerate that adoption I’ll give one statistics which is very very interesting so let’s talk about solar adoption right uh like I said 10 lakh homes in India have solar the first one lakh homes to go solar took about 5 years and that Milestone India hit around.
2019 and then you know covid hit and of course there were you know tough years in between but even as early as last year it took 9 months for the for one lakh homes to go solar but today it it is taking as little as 50 to 60 days for one lakh homes to go solar so in less than 2 months now one lakh homes is going solar and I’m very confident that.
Next year in less than 30 days one lakh homes will be going going solar and by 2026 27 I’m further confident that in about a week or two one lakh homes will be going solar so India’s solar Revolution is happening very very fast uh as of today we have 10 lakh homes powered by solar uh some of the more pen rated countries like the US have about.
50 lakh homes powered by solar which was a milestone us hit just last quarter and India is talking about 1 CR homes to be powered by solar in just three years right years in just three years that’s the announcement that our prime minister has made that under the pradan mry surar yoga with this 78,000 rupee subsidy the target for India is for one CR homes to.
Adopt solar in three years uh even if that happens in four to 5 years I think it’s a phenomenal feat there is no other country in the world other than China which has crossed the 50 lakh home solarized Milestone right so from 10 lakh homes I think very quickly India will cross 50 lakhs and touch the one CR homes Milestone and with that India will.
Be one of the most uh solar penetrated countries uh when it comes to homes in the world that is incredible yeah that is incredible now tell me Shreya I want to jump into two subjects right now one is the business opportunity in the Solar space and I want you to break down the value chain of solar so that we can understand where does the opportunity.
Because if the time is increasing with such a rapid Pace it means that there is a tremendous opportunity and we would need not one but 10 solar Square type companies to be able to service this demand the second thing that I want to dwell deeper into is from the customer standpoint that if I have to install solar panels in fact my uncle recently.
Installed a solar panel in the US and he was extremely skeptical he made God knows how many excels did so many analysis just to get hold of solar and can you imagine in the US for an educated American citizen if it is a matter of so much skepticism in India obviously customers will have a lot of skepticism so let’s first look at the.
Business opportunity because from business opportunity if you go to skepticism we can also understand from the customer standpoint what are the problems that these businesses have to solve sure so let’s start with the business opportunity when it comes to the solar industry how many categories of business can.
Exist while the customer goes from thinking about a solar panel to setting up the solar panel to maintaining the solar panel and then changing the solar panel right absolutely so you know the simple answer lies in the value chain first there are the original equipment manufacturers there are companies who manufacture panels inverters cabl switch.
Gear Etc like I said a rooftop solar system let’s let’s go actually from the end C customer the End customer requires a rooftop solar system that could power his home like I said a well-designed well-maintained solar system produces free electricity for 25 years right now this has more than 70 components so the first business in the value chain is.
Manufacturing right which of course requires capital investment which is requires expertise manufacturing Etc and that is where all the large you know uh conglomerates of India are also in so adani manufacturers panels Tata manufacturers panels um Vari manufacturers panels etc etc then come the inverters inverters are still mostly.
Imported from China a few brands in India are tinkering with it but mostly it’s white labeled but you know there are Brands which basically sell inverters in India that are manufactured ultimately in China which is white labeled in India right so a lot of inverters even in residential solar are directly for example solar Square.
Directly works with Chinese manufacturers and we import our inverters from China right okay just a second over here U does the government provide incentives for making India inverters no no not so you have no other choice but to import from China because you get the cheapest inverters from there yeah wherever you get the best.
Product and the best price you basically have the freedom to procure from there but for panels there is uh you know a protectionist policy where to get a subsidy you have to use a Made in India panel now let’s look at the next part of the value chain right now consumer is not buying these panels inverters and putting his own solar system they need.
What is called a solar installer in between a company who would help a family understand how much solar do they need 3 Kow 4 Kow 10 Kow then design it then procure all the different components from the right manufacturers choose the right technology choose the right quality of product procure it at the right price and then install it at.
Their home right so then comes the you know design procurement design installation and then the after sales now one thing that that the installers in India do incorrectly is they are all in the business of install and forget solar but that that is not how solar operates we’ve been doing rooftop solar for almost 10 years now and solar like.
Any other product category in fact a lot more than other product categories requires a lot of Maintenance because your rooftop solar system is installed on your roof it’s exposed to external weather conditions right and India is a very dusty country we have a lot of construction Dust We are a developing country roads are getting constructed.
Homes are getting constructed plus the soil quality of India is that it’s very hard and sticky dust now when that settles on the solar panels the the sunlight cannot reach the panels and so simply the dust and you know bird droppings and all other environmental factors caus the solar power production to go down now an innocent family buys.
Solar thinking that they’ll break even in four years 5 years but because of dust and lack of Maintenance of solar post installation the power production goes down by as much as 30% in just 6 months in just 6 months in just 6 months does it go further down it keeps going down from there on if the maintenance is not done hence post installation so.
Solar square is in the business of install and operate so what we do is that we tell our customers that you’re not just buying solar from solar Square you’re actually buying power savings from solar Square so we guarantee power production and savings to the customer for 5 years in these five years we conduct a regular monthly maintenance of.
The customer solar and we have built the technology stack to realtime Monitor and manage all the solar systems that we have installed across India so can you go deeper into this savings guarantee thing and help me understand what exactly do you provide to the customers sure so solar square has been doing rooftop solar for the last 10 years and.
In these 10 years you know solar as an asset has a 25y year life so the asset class itself requires designing durability and you know performance Assurance for two decades right so it requires a lot of you know understanding of the technology and how to ensure maximum performance from it so one learning that we had in the last 10.
Years is that because because India is a Dusty country and because there is this sticky dust that you know that our Indian soil uh has performance of solar can go down by as high as 30% in just 6 months and when we entered residential solar about 5 years back we learned that consumers were beinging food left right and center and being sold solar Bank.
Saying or install and forget right Which is far from the reality right without maintenance your solar system performance will come down because dust and bird droppings deposit on it with that you know you have other issues that start coming up so when panels have dust on top of it uh they start producing heat instead of electricity okay and.
That heat leads to the panels burning from inside so the panels start developing something that is called hotspots so one your performance has gone down your panel has developed hotpots which means now even if you clean it it’s permanently damaged because you know for six seven months whatever you did not maintain it.
Properly the hotpots LED to damaging the panel now when your production will go down you’ll try to claim a warranty you’ll realize that your warranty is also rejected because all solar panel warranties in India are actually subject to the installer maintaining the solar so without maintenance even your warranties get rejected right because.
Nobody can you know cover you against stuff like a Hotpot and your panels burning from within the worst part is that over a period of time these hotspots can heat up so much that it can actually also lead to a fire risk right and a fire can be caught up in your solar system it won’t happen on day one or in 6 months but it can happen in 3 to.
Four years so like I said a rooftop solar is a, volt DC system system and innocent families who have never bought a solar for themselves who don’t understand this technology who don’t understand the risks of lack of Maintenance and the benefit of a well-designed highquality safe system which is maintained they can make the.
Wrong sort of mistakes so while this solar Revolution and all is great I think what is very very important is awareness among customers about quality safety and performance so we are in the business of solar with savings guarantee which means we are the only company in India from where if you buy solar you get a 5year performance guarantee it’s.
You can think of it a little bit like guaranteed mileage solar guaranteed savings B so then it is my responsibility to take care of everything the quality of components the design the installation and the maintenance for 5 years after that to ensure that the customer is getting his maximum savings and power production.
Under savings guarantee if your solar produces less power so let’s say if it produces you know we told you you’ll make 5,000 units but you only made 4,500 units we will pay you back for the balance 500 units okay so effectively this becomes like a solar fixed deposit wherein the customer is investing in solar and for the next 5 years he has.
Guaranteed the savings any deficit in production we will compensate along with that we also guarantee zero repair replacement cost what is that so what that means is that you you know you invest one time in solar and you think it’ll make you free Power for 2025 years but what if it breaks down what if it has repair expenses what if your.
Warranties get rejected right and it is a very very very common reality in India that because of lack of Maintenance and cheap solar that’s poorly designed uh because of all of those reasons people start getting repair expenses so you know I’d like to uh quote a very very important research that was done by a reputed think tank in India called cew.
Now when they had conducted a research of quality and state of residential solar installations in India they found out that 50% homeowners were generating 30% lesser power which means one and two homes were actually had bought in solar but were realizing much lesser savings and a large part of that 80% of you know homes were found to have no maintenance.
On solar some 20% homes are found to have solar installed in Shadows right and there were similarly several issues like stale Trail hotspot quality issues lack of Maintenance etc etc right so while the solar Revolution is great and everybody thinks that they can save from solar it’s very important to understand what is s solar solar to say solar what.
Is the solar that will give you maximum savings and maximum return and only then can India solar Revolution be successful right uh because if a lot of people end up buying you know a lot of products are great but when people end up buying wrong things or wrong business practices or lack of consumer awareness leads to people not realizing the benefit of.
Solar the entire industry and the entire solar Revolution takes a backseat right got it so so today if you’re installing one lakh solar panels per 60 days how many solar panels do you install out of these one lakh solar panels sure so one lakh not solar panels but solar systems so one L homes okay one L homes almost 50,000 homes are going solar every month.
Currently in India solar square is operating in just 15 cities of India and with this we are the number one residential solar brand in the country so even on India’s national solar portal we’ve been the number one brand since 2022 currently we are doing about a thousand homes a month in India that are going solar with solar Square in just.
These 15 cities that we Opera in which means there is room for 49,000 homes every single month which means India needs 50 solar Square type companies with the existing demand to be able to service these customers absolutely so India has more than 5,000 small and big M and pop residential solar installers registered on India’s national solar.
Portal and like I said uh there is a varying degree of professionalism in different solar installers that are there in India so India’s Target was to buy now reach 2 lakh homes a month we are still at about 50 60,000 homes a month so India is still far behind you know the pace at which we want adoption to happen in India so actually there is.
A massive opportunity uh of you know both for consumers to become aware but for also solar companies like solar Square are ramping up our operational capacity so we are growing uh every month we are adding more sales guys we are adding more installers we are adding more operations team members after sales Crews etc etc I think I think the pace.
Of this revolution is of course important for the solar Revolution to be successful we don’t just have to measure how many homes installed solar or how many megawatts and gigawatts of solar got installed but actually also track how much power is being produced are they actually generating the electricity and helping with both electricity bills.
Of consumers and also with climate change right because if we install solar and you know like that research done by CW if 50% homes are producing lesser power it basically doesn’t help the the whole sort of solar Revolution to actually realize its true potential makes sense you know what shya um my uncle would have loved a solar Square.
Type company in the US because he did all of it by himself and even now he’s extremely worried about maintenance and the one skepticism that I had I said why are you thinking so much about installing solar and that’s when he told me that the area that he lives in um again that area Witnesses weather conditions which are not so favorable um.
Their labor costs are extremely high so if he has to call somebody to maintain the panel it becomes extremely difficult they don’t have skin in the game for examp example if you have this strategy whereby you give out um a power savings guarantee what happens is that you take accountability of maintaining the solar panel but in in the US he hasn’t found a.
Company that can do it so this end to end solution just gives the customers so much of free mind space to be able to do better things than just think about their solar panel and when it starts raining also you know until you get hold of a asset which is lying outside you’re not worried about it but the moment you get it and then there is rain the first.
Thing that comes to your mind is is my solar panel okay this happened to my house when we got a dish yeah my father was extremely skeptical the moment he got hold of a dish he was like it’s raining what’s happening to the dish I’m like Dad we are literally the uh late adopters of dish but that also helped me understand.
How do the customers look at a very valuable asset right because if they’re investing 2 to four lakh rupees that can get you a car today so 2 to four it is such a intuitive thing to do that is you install solar and then you forget but then that forget is what cost you so much money absolutely very interesting so sh just to summarize your.
Answer over here we’ve got three Market opportunities one is solar manufacturing the other is in the inverter space right now we are not able to compete with Chinese inverters but if Indian company bring down the price that be great and then we have a huge Market opportunity with install and forget where you are able to serve about 1,000 customers.
1,000 homes per month but India is adding 50,000 homes to the solar sector which means 49,000 white space this is now going to double to 2 lakh very very soon and it is going to double to one lakh and then double again to 2 lakhs which means there’s a huge Market opportunity that people can tap into do you also do this for housing.
Societies how practical are solar panels for housing societies for example I live in a building which is more than 60 60 floors so is it practical to have a solar panel for a building of that size right so the residential solar Revolution is pretty inclusive so both homes and housing societies both are adopting solar at a rapid Pace there is.
Subsidy also for housing societies by the way which is much higher it is actually a subsidy of 18,000 rupees per kilowatt that goes all the way up to 500 kilowatt which means for a housing societ they can put up Solar Solutions on their roof and they can get subsidy up to 90 lakhs it is incredible the kind of financial support that is available.
Now housing societies use their rooftop to put up solar because the roof is a shared real estate the rooftop solar is for common area amenities so if there are 50 apartments in a society the rooftop solar system will offset their common area bills which is lift pump street light you could have a gym in your building so all of those common.
Area electricity expenses can be offset through rooftop solar interestingly 40 to 50% of a society’s monthly expense is actually electricity right especially in the state of Maharashtra where you know Bombay and Pune both have a lot of housing societies then Bangalore Delhi Hyderabad all our Metro cities are mostly in vertical living the tariffs.
Are very high so in Bombay your electricity tariff in a Housing Society could be like 12 13 rupees in Pune it could be 15 to 20 rupees depending on how much power you consume per unit right similarly in other cities also like the housing societies pay commercial tariffs which is quite high and uh and so the economics and break.
Even for so the payback period for a Housing Society in a Maharashtra would be like 2 years two years so it’s insane right 25 years of free electricity and a payback of two years and with the subsidy even in like a Bangalore and Delhi the paybacks are all less than 5 years so it’s actually very lucrative for housing societies to go solar and.
Interestingly solar square is number one in India also in the Housing Society W so we have now close to 200 housing societies that we have powered with solar and we have close to 18,000 homes that we have powered with solar so in both of these categories we are actually number one is it practical to think that with solar panels on the Terrace can it.
Power the entire building like including the homes yes so it can practically however the policies around it are not yet uh you know structured so what you need if let’s say you have 50 homes in a society and if every home wanted to be powered by solar technically you can but you need an nooc and every home to participate in this solar thing right.
Usually what happens is out of 50 homes Two Flats are unoccupied four people don’t want to be a part of it then you have to get an nooc from everybody so it becomes like this Democratic and difficult decision-making process right versus if you put up solar for common are amenities everybody is saving equally right and so it’s in everybody’s.
Interest uh usually the funds for solar will come through the housing society’s Corpus so usually they collect you know monthly maintenance and they do have certain Corpus so old societies will have cores and cores of Corpus right so a lot of societies are basically rather than putting it in fixed deposit they’re actually putting it in solar and.
Realizing four to five times higher return on investment than a fixed deposit right makes sense so so yeah so that’s how the housing societies are adopting solar got it sh let’s break down the economics of installing a solar panel for an average Indian household okay how much does it cost to install a solar panel in India so let’s look at.
This math uh for a family uh a family which consumes let’s say about 500 units of power in a month we’re taking a simple example uh most common tariff India is about 8 rupees right if you are living in Maharashtra your tariff could be 12 13 14 rupees if you’re living in utar Pradesh your tariff could be 7 and a half rupees but we are taking a simple.
Example 8 rupees which is the most common tariff so 500 units of power if your family consumes in a month your power cost will be 4,000 rupees this is your variable power cost over and above this you will have some basic meter rental charges in your bill as well which will be fixed charges there would be something to the tune of 200 to 300.
Rupees on top of it right now if you were to put up a solar system of 4 Kow a 4 kilowatt system will roughly give you 450 to 500 units of power in a month right so for Simplicity sake we’ll take 500 units of power in a month now a 4 kilowatt system typically requires eight panels right each panel is give or take you know the latest technology of panels.
Of 540 Watt peak so 0.54 kilowatt right so eight panels will effectively give you 4.32 Kow right now this 4 32 Kow solar system will produce enough power to make your 4,000 rupee energy charge zero what you will pay is just the 200 to 300 rupees rental charge which you you know the meter rental charge which you’re still paying so a 4.32 Kow system.
Over a year will save you broadly 48 to 50,000 Rupees right for simpl Simplicity sake we’ll take 50,000 Rupees right now let’s look at the cost of the solar system the cost of the solar system will largely vary a lot of people think this is like alub baji right like oh How much rupees per kilowatt without truly understanding what is the quality safety.
Service of solar right like we understood a good quality in a good quality solar you have to invest in storm proof Cyclone proof module mounts you have to invest in after salale service you have to ensure that the quality of components is good one of the common areas where consumers are actually being cheated is that.
Secondhand panels are also being installed because consumers are also not able to recognize you know these panels are they brand new or are they secondhand right so you have to be worry of a lot of those things that can lead you to you know uh less sort of savings from solar so one thing when you look at solar that we advise customers don’t.
Think of minimizing the cost think of maximizing your return on investment right so invest in a good quality solar with after sales so that you have piece of mind and you know you are maximizing your return on investment right cheap solar can actually be very expensive and that’s something we try to educate customers most importantly from a family.
Safety perspective right so if you were to buy a 4.32 Kow uh system from solar Square for your home the cost will be between 2.9 to 3.1 lakh rupees right this is for the highest quality safest solar system with a 5year after sales and savings guarantee as well which means if any power production is lesser because of any reason we will pay you.
Back for it at 8 rupees per unit so let’s say we told you that we’ll make you 500 units per month in a year it becomes 6,000 units let’s say I only produced 5,500 units for you we will pay you back for the balance 500 units right so this way it becomes with the solar Square Savings guarantee it becomes like a fixed deposit your initial investment.
Is fixed and your savings is fixed and you have a guarantee of zero repair replacement expenses as well so that gives you a lot of Peace of Mind to the consumers like I said you can buy solar at a lot of prices very much like a car whether you’re buying a a diesel car or a petrol car uh you know different price points depending on different you know.
Hatchback sedan Etc similarly in solar also you will hear a lot of prices so before deciding the price first understand what do you want in solar system right like for example if safety is Paramount to you if peace of mind and savings is Paramount to you make your decision accordingly so that’s one of the biggest advice we I always have for.
Consumers because cheap solar can be very very expensive got it right so now let’s look at the further look at the economics so on this investment you’ll get a 78,000 rupe subsidy from government of India so your net investment becomes actually 2.1 to 2.3 lakh rupees right on this investment like I said you’ll save roughly 50,000.
Rupes per year right and so your solar payback is a little over four years right and and so that is the economics of solar like I said if let’s say you were living in Maharashtra at the same 500 units of power that you produce you’ll be saving at 12 rupees per unit right so instead of 4,000 a month you’ll be saving 6,000 a month right so you’ll.
Be saving 72,000 in a year and hence in Maharashtra the payback will be less than four years right so your payback can vary depending on your power tariff got it and how much do I have to pay solar Square per year for maintenance right so in this initial investment the 5year maintenance and savings guarantee is already included so after this you.
Actually don’t pay anything so if I invest 2.9 to 31 lakh rupees minus let’s say the 80,000 rupees of subsidy 78,000 rupes to be precise so if I invest 2.1 to 2.3 lakh rupees in my solar panel for the next 5 years I do not have to worry about my efficiency solar Square will take care of it the maintenance and everything so under this what all does.
Solar Square do to make sure that my solar panels are efficient right so like I said solar square is in just 15 cities and we have th almost 1,000 customers per City you know in few cities more than a th000 customers so we have a very deep after sales network so the one thing like I said solar requires regular maintenance very much like your car.
Requires servicing air conditioner requires servicing rooftop solar systems also require regular maintenance so the first thing that we do is a monthly power boost service power boost service is basically where a solar Square technician would come to your home they would do a complete system health check including deep cleaning of the panels.
Now cleaning of the panels is very very tricky business a lot of people think but actually solar panels are made of glass on the top and like I said Indian dust is very hard and sticky so you have to use a certain pH of water a certain soft bristle brush and a trained technician to make sure that you’re cleaning the panels uniformly one of the.
Common things that we have seen is panel P all the dust settles at the bottom right when the dust settles at the bottom that is exactly where the hotpots get created and most solar panels that that are have those dark black burnt spots as you can see in this image most of these are at the corners of the solar solar panels because you know of.
Improper and and uh uneven cleaning of the surface right so this is a professional deep cleaning that we do and under this it is our responsibility that nothing happens to your warranty as well to give you the Peak Performance but while giving it we don’t have to you know we have to make sure that the panel is not damaged as well right and then we.
Have electrical health checks mechanical health checks you know our wind Pro Mount is nut bolted we don’t do welding in our windro Mount the mounting structures so because of thermal expansion contraction we have to keep checking the nut bolts as well to make sure that the safety the mechanical safety of the structure is actually not.
Impacted so it’s a complete health check like I said and it’s a power boost service so that’s one thing that we do the other thing that we do is we take care of all your warranty claims so with solar Square even if the manufacturer rejects your warranty we cover you for it so it is a it is a do to-door warranty which means that let’s say if.
Something happened to your panel and the manufacturer said it’s not my fault you know it’s a hot spot because of whatever reason I mean a lot of warranties are rejected in India in residential solar mostly the blame goes on the installer and the manufacturer and installer keep fighting the End customer never gets their warranty so solar Square also.
Covers the customer for that which means if the manufacturer rejects the warranty we’ll actually pay from our pocket and cover you for it so that’s the other thing that we do the third thing is realtime monitoring um uh Ganesh so we are the largest operators of distributed solar assets in India by volume each of our solar systems that we have powered.
We have realtime data on how much power is being produced and every day we are monitoring our entire portfolio of homes that are powered and housing societies that are powered by solar Square so with this data we have predictive you know analytics on which home is performing well where is the performance going down like you said you know power production.
Like I said goes down by you know can go down because of dust and bird dropping we also monitor the rate of you know power production issues you have an idea about all the solar panels yes so we have an idea of every single one solar panel that is installed across India by solar square and we are monitoring their power production so if there is for.
Example I installed solar on your home and your neighbor started a construction that led to a lot of dust in your area right for 2 three months there was a lot more dust we’ll have data that your panel is underperforming more than usual and we’ll do a extra power boost visit for your home what are you saying so this is not routine like you will know.
When the solar panel is not performing and then you will come and service it absolutely that is incredible I wish Urban clap could do that for my house so exactly so we have realtime data of every home and with that we are able to get smarter about how we operate and maintain this asset right because I have given you and our all our customers are.
A guarantee right so I need to know about performance at all times and I need to take corrective action whenever there’s a problem sh this business model that you are in I mean it is extremely customer friendly but I’m just trying to understand like what exact is a margin that you make out of it if I paying 2.3 lakh rupees a large chunk of it goes.
Into the solar panel then there is the installation of the solar panel and then you have very less margin for maintenance and the installation both right so my question is out of this 2.3 lakh rups what’s your gross margin like right absolutely so I think the the whole Magic of Maintenance only works with a large customer density um Ganesh.
Right so not all businesses operate you know can make the same margin at every volume level right if you look at quick commerci right the more customers there are the more dark stores there are the more margin there is very similar to this because our business is so heavily about after sales customer density really matters that is why despite being.
The number one company of India we’re only in 15 cities because our idea is to go super deep in those cities cities like Pune we have close to 30% market share Bangalore we have 25% market share Hyderabad we have 15% market share so our idea is to have like go really deep so that we’re able to service our customers at a low cost while still.
Making margin right so that’s one of the important parts of you know making margin in this business so sh at the unit economics level let’s say you stop investing in growth today out of these 2.3 lakh rupees what’s your gross margin like right so our gross margin is between 30 and 40% depending on you know different order sizes right like the.
Bigger it gets the lower the gross margin but the bigger the project size is but in the between the 30 to 40% range is where our gross margins are uh below that we have cost of operations cost of designers who designed the solar system uh the government permits that we have and then installation charges you know we actually have to do the.
Installation at the customers home then the after sales charges and guarantees and all that we give to the customers so on a unit level our typical order size is between know typically 4 kilowatt is our average size so roughly 2.7 lakh Rupees is where our typical you know uh order size average order sizes you know some people buy two some three.
Some 4 kilowatt some 10 kilowatt also but 2.7 lakhs is where our average order size is and on a per order level we make close to 10% okay uh as our margin net margin as our net margin net of all expenses including sales marketing material everything got it so net margin is 10% and gross margin is close to 30 to 40% got it so sh when it comes to.
This 10% margin it’s an extremely dicey margin space to be in right because you are giving so much to the customers and it’s so much on foresight that in the next 5 years based on your calculation customers will experience only that much trouble that that you will be able to service them viably right and 5 years is a very long time like we don’t know.
What’s going to happen in the next 5 years and in fact 5 years back we had covid so we can imagine what’s going to happen and like you mentioned that Cyclones are getting more and more frequent so in the next 5 to 10 years in just the two cycles that we about to witness we are about to witness a lot of chaos so my question is this 10% margin.
Could it go down further in case of an extreme scenario right so I think ganish it is very important to look at business is uh you know holistically right so I think when it comes to solar Square we are building a brand in an unorganized market right now as we said you know 50,000 homes are going solar then two lakh one lakh homes will go solar then.
Two lakh homes will go solar everybody you know a lot of unorganized players will come in thinking this is a party oh there is so much demand to be had right but unless you have a unique value proposition and there is this word called you know can you charge your fair margin right if you do not have a unique proposition to the customer it is a race.
To the bottom because you will always be in the fight to say can I do this cheaper right so anybody who’s in the business of saying can I sell this cheaper is on a race to the bottom right and so somebody will always be there who will say I’ll do it at a lower margin right somebody will always you know be you know for be an entrepreneur for two.
To three years be on a suicide mission and you know keep keep making it cheaper without realizing that he’s making losses right so there is a lot of that raise to the bottom if you’re in the business of selling cheaper we are not in that business what we know is very very firmly what we stand for and what value we deliver to the customer sh when.
It comes to your business it’s very difficult to Market your business because when it comes to solar because solar square is not yet such a big brand solar solar square and this is such a I wouldn’t call Trust deficit it is trust deficit but people are not aware of the trust deficit that exists and they will only come to know after a repercussion.
It’s just like insurance insurance but then only after it cost you money that you understand that you’ve bought the wrong insurance and by that time it’s already too late so the realization of the customer requires one cycle of problem right so before that happens how do you educate a customer about the problems of solar put up your.
Proposition and then get them to spend two to four lakh rupees with you um and by the way do you have Bollywood actors endorsing your brand not at all okay so how do you get customers to trust you for a decision that’s worth two to four lakh rupees without Bollywood actors endorsing you right and I think the biggest learning there we had Ganesh and.
You know uh I have this is my second startup so I have a fair amount of experience in marketing and brand building the one thing we realize is that when you are building for a high ticket size category with such a long life right we’re talking of 25 years of product life what we realized was that there is no marketing better than.
Customer service and this is very counterintuitive right we believe that our good customer service is actually the best form of marketing because what allows us to grow quite nicely without burning a lot of money is actually the fact that when one customer goes solar he recommends his friends and family so currently on average 10 crores of.
Revenue a month walks up to us every month because it’s purely referrals so referrals is close to 35% of 35% yes it is 35% of our monthly sales and that of course we give a 5,000 rupe referral bonus but when it comes to a high trust purchase category you can give any amount of referral bonus people will not recommend till they are truly happy the.
Referral bonus is a little bit of a nudge on top of it right so we’ve tried to build a really nice referral program where our customers are referring their friends and family and office members and relatives etc etc to go solar so 35% of our Revenue comes by that about 50 55% comes through Performance Marketing so we do Facebook ads Google ads.
Instagram ads Etc and of course there also we depend heavily on educational marketing Ganesh what we’ve realized is that because it’s a High ticket size category and like I said everybody is a first-time buyer nobody really knows what to look for when going solar so people do a fair amount of research right and so educational marketing works.
Really well so one of the things that we’ve done amongst you know we of course do YouTube videos and educational content we’ve also published a handbook for going solar it’s a homeowners guide to going solar what we also do is a our monthly webinars for anybody and everybody they are literally janit meari educational webinars where we talk about.
The benefits of solar the economics the payback what what is s solar what is good solar versus bad solar what is the importance of Maintenance and we basically create education so that we can have a generation of solar educated adults uh who understand the benefits and who are taking good decisions and who are taking safe decisions for their.
Family when they’re going solar so that has also led to a lot of trust building it invariably happens that a lot of people who attend these webinars they end up buying from solar Square when they understand the kind of thoughtfulness and safety standard that we put behind our are offering to customers so educational marketing has.
Been you know another important aspect of customer awareness we haven’t hired celebrities yet but like you said solar M solar Square that’s obviously the dream uh we believe we are the category you know we are the number one residential solar brand in India and we could become the category defining brand in this industry as well and for that at.
Some point maybe we will also hire uh you know a celebrity or a cricketer but till then I believe the most potent and Powerful form of marketing is actually Word of Mouth um because you know in high trust categories uh no matter how much marketing you do and no no matter how many celebrities you hire if Sharma G is not recommending to m g right uh.
You can or if Sharma G is telling m g this company is not good you know no amount of celebrity marketing can help you so customer service is honestly the biggest uh form of marketing that is incredible Shrea one last question I know that you can figure out that you’ve got great customers through referals but how do you figure out about bad.
Customers as an unhappy customers do they just call you right so we do have a call center and customer service you know that team that’s always on the lookout like I said because we are monitoring the customers rooftop solar performance we actually try to minimize the number of unhappy customers by taking corrective action so even before.
Our customer will realize before that our Systems and Technology platforms create an alert and our after sales crew will reach the customers home and figure out what is happening right but otherwise also definitely in every business there will be some customers who will be unhappy so of course we do have a customer service.
Team call center team we have field after sales technicians who take care of any issues on the ground of course government permits used to be a big big issue in the early days and we didn’t touch upon that but as part of the PM surar scheme I think one of the most phenomenal things that India has done is that that we are actually making it.
Faster online and paperless for a family to switch to solar so literally 3 years back Ganesh for a family to go solar in India we would apply for permits we would have to have to take signatures on a paper take it to the local B vibha then they would give it to the next Department it could take as as much as 60 days to 90 days for a family from.
Start to finish to go solar right and there are permits before you go solar and then there is like an inspection by the local discom so that would take you know a month again now government of India wants to make it so fast and online and paperless for families to switch to solar to the extent that we can get a lot of these permits in.
Literally one day one day can you imagine in one day so start to finish of course you know we get the permit then we do the installation then there’s an inspection by the local discom after which your subsidy comes in your bank account start to finish India could be looking at families being able to go solar in 30 to 40 days and while that.
May not seem like much I can tell you this in the US even today in 2024 where 5% American homes have already adopted solar it still takes 60 to 90 days for a family to go solar and permits are extremely expensive they are not online and they are very very painful so I think India is really leading the charge in terms of the it infrastructure that.
We are building for homes to go solar and you know if we can I think there is a I I’m I think there is a future well in India you’ll be able to go solar in literally one to two weeks start to finish all the permits right the installation itself with our windpro Mount the modular mounting structures it just takes 8 hours so the installation.
Itself just takes 8 hours but it use the permits used to take 60 to 90 days two years back so today the installation will take one you know 8 hours but the permits also take much lesser time and like I said I think in India we’ll be looking at a 2 to 3 week period for a family to switch to solar which will be better than any developed country like.
Germany or us or Australia and so I think India is really serious about you know the solar Revolution and making it easy for families to switch to solar that is amazing sh I am so delighted that I got a complete breakdown of this is perhaps the best solar case study I could have done so I’ll just quickly summarize and if there’s anything that.
You think needs to be added we can just add to this summarization the first thing that we understood is that India is a very very fast growing market for solar what we understood is that there are one lakh homes that are going solar every 60 days which comes down to 50,000 homes per month and solar Square which is the top solar installer in the.
Country is only able to service 1,000 ohms which means there’s a huge Market opportunity and when we got deeper into Market opportunity what we also understood is that there is the inverter there is the panel and then there is the Mount these are three components where the biggest opportunity lies because 50,000 solars will require 50,000.
Inverters 50,000 mounds and the panels as far as the value chain of solar is concerned we’ve got polysilicon ingots Wafers and the panels ingots and Wafers and poly silicon all of them they come from China and today we’re heavily dependent on China whereby more than 95% of these ingots and Wafers come from China then we have cells and panels.
Whereby earlier we used to do only panels in India but now we have now we have backward integrated to sales but even now wers and ings is a big big problem as far as inverters are concerned today there’s a very big cost advantage to the Chinese because their costs are extremely low as compared to Indians so if somebody can bring down.
The cost of inverters in India as compared to the Chinese that’ll be great as far as the panels are concerned I think the cost of panels from what you mention mentioned for China which is unsustainable at the moment is close to 12 to 13 rupees per kilowatt but per watt but for India it turns out to be 22 to 23 rupees that is expected to come.
Down to 18 to 19 as we achieve scale and as far as solar installation for a family’s concerned what we’ve understood is that for a 2 to 3 bhk consuming 500 units per month a 4 Kow solar panel is great assuming 8 rupees per unit that’s 4,000 rupees per month in electricity bill if they’re able to install this panel um eight panels actually with.
Giving them 4.32 Kow they’ll be able to bring down this electricity bill to zero and the only charge they’ll have to pay is the 200 rupees of metering which is quite insignificant then when it comes to India as a country we have a problem of centralized distribution which is where our discoms come in 50 years back discoms were great but now discoms.
Themselves have become a problem because of which we are inefficiently Distributing power we are wasting a lot of power at the same time it’s also extremely hazardous and unsustainable for the growing per capita power consumption in the country um which is why decentralized power is required and solar just happens to be decentralized.
It happens to be clean and the cost seem to be dropping down in India back then the break even time or the payback period was 9 to 10 years but now it has come down to 3 to 5 years and it is expected to come down further to just 3 years in the next four to 5 years then as as far as the subsidy for solar panels is concerned we get about 78,000.
Rupees in subsidy and the best part is because of the portal and because of the direct benefit scheme we are able to get the subsidy in less than 30 days which makes it extremely lucrative for all the families so they can jump into Solar without actually worrying about the direct benefit scheme earlier it was extremely Troublesome so if somebody.
Listening to somebody who installed solar B 3 years back don’t worry because now you’ll get the subsidy in less than 30 days then we have something called net metering which makes it very very interesting because a lot of families have the skepticism that but that’s where the grid is not going out anywhere it’s just that the.
Grid is there and while the solar panels can produce electricity during the day during the night you can still rely on the grid and get rid of electricity from there but it’s just that because you’re producing a lot more power in Surplus during the day and during the night there is deficit it balances out because of which your electricity Bild Still.
Remains zero and regardless of the weather conditions if there is Monsoon or if you are in a region which is extremely CL you can still depend on the solar panel and if not you still have the grid so that you can get consistent power supply so the skepticism of lack of power does not exist in solar because you’re not.
Getting rid of the grid and solar is India’s oil it’s just that investors recognize it but customers don’t recognize it yet but if we do together as a country we will be able to reduce our dependence on oil because of which The Godfather is extremely bullish on solar if he end up doing this then in the next 20 to 30 years if at all we.
Able to Skyrocket the adoption of solar India will not have to depend on oil if India doesn’t depend on oil and it doesn’t depend on any other Chinese solar supplier we will be able to control inflation the economy will Skyrocket and the hatic growth that we’re about to experience in the next 5 to 10 years will actually be fueled by.
Solar which is where companies like Vari solar square and several other companies happen to be beneficiaries the one thing that I found very interesting is also the opportunity that exists in the solar space with regards to the value chain you mentioned that OEM inverters and installers is where the biggest opportunity lies OEM is for big guys.
Like Tata Adan and Vari but when it comes to install and forget when it comes to inverters Chinese have occupied a large territory but when it comes to install and forget there is a huge opportunity and here there are two messages one for the entrepreneurs and the other for the customers for the customers the messages install and.
Forget scheme doesn’t exist unless you have somebody as Dependable as solar square and you will have to pay a premium for it it’s not that you can just install a solar panel and forget you have to rely on somebody who understands solar panels somebody who’s a legitimate brand and not go for unorganized players even if they’re.
Giving you a one lak rupe discount because cheap solar panels are costly are expensive and um the message for the entrepreneurs over there is that there is a huge opportunity in the install and forget segment if you can help the customers install solar panels and let them forget about it that’ll be incredible and here solar square has.
This unique proposition position of being able to maintain the solar pans for the next 5 years with the power guarantee strategy which also happens to be a great strategy that other entrepreneurs can pursue provided the economics make sense and they will only make sense with skilles which means you will require Venture Capital two.
Messages over here entrepreneurs need to raise Venture Capital Venture Capital this scheme is extremely sustainable because solar square has already hit um 350 crores in just 9 years so here if you can help the customers install and forget you can build a brand because even today 49 ,000 homes are still available as a wi space for you to.
Capture 15 cities that solar square is in um is a healthy Market opportunity because you guys are already you guys have already invested enough into education which means there’s more space the beauty is it’s a blue ocean because the market is so big that even if you have 10 solar Square type companies it’s still enough for everybody to make.
Healthy margins and because the Godfather likes you all of us all of you guys are going to make money the one thing that I also want to throw light on are the variables that can probably change the costing of your solar panel um the cost that sh mentioned is for a specific house and um as your layout floor state government charges technical.
Charges and maintenance charges keep on wearing these charges might go up and down the range is 2.9 to 3.1 lakhs without subsidy and it is 2.1 to 2.3 lakhs with subsidy okay and this is as of 2024 as far as solar panels solar squares marketing strategies concerned 35% comes from referals which is absolutely.
Incredible you educate homeowners through webinars you also have a guide which I will attach in the description for everybody so you can download it and have a look at it do you guys have a YouTube video with this guide okay I will also attach the YouTube video for you guys with the link in the description and 55% of your customers.
Come through Performance Marketing and and uh you don’t have any celebrities yet so an opportunity for the celebrities as of now but thank you so much R it’s been a pleasure um I just hope this summarizes our entire discussion absolutely it does thank you so much thank you so much R thank you so much.
