Introduction
India’s Small and Medium Enterprises (SMEs) power the nation’s economy — contributing 30% of GDP and employing over 110 million people.
With grid tariffs climbing steadily, energy bills are eroding profitability. Many SME owners want to go solar, but are held back by capital costs and system maintenance concerns.
But there’s one recurring challenge for most SMEs: high electricity costs.
Here’s the good news: Power Purchase Agreements (PPAs) make solar energy accessible, affordable, and risk-free for SMEs — with no upfront investment required.
What is a Power Purchase Agreement (PPA)?
A PPA is a long-term agreement between an SME (the electricity buyer) and a solar developer (the provider). Under this model:
- The developer installs, owns, and maintains the solar system.
- The SME pays only for the electricity consumed — typically at a lower rate than grid power.
- Contracts run between 10 to 25 years, offering long-term price stability.
In simple terms: You get clean, cheap solar power on your rooftop — without spending a single rupee upfront.
PPA Models Tailored for SMEs
1. On-Site PPAs
- Solar panels are installed on the SME’s rooftop or premises.
- Power is consumed directly, reducing dependency on the grid.
- Ideal for units with adequate roof space and consistent demand.
2. Off-Site / Open Access PPAs
- Power is generated at a remote solar plant and delivered via the grid.
- Suitable for SMEs with limited roof space or higher electricity needs.
- Works best where open access policies are favorable.
3. Group Captive PPAs
- Multiple SMEs jointly invest in a shared solar project.
- Each participant owns a stake and receives energy in proportion.
- Good option for clusters of SMEs (e.g., industrial parks or associations).
How PPAs Deliver Strong Financial Value
1. Zero Upfront Investment
- Developer bears 100% of system cost — from design to installation.
- SMEs avoid capital expenditure while still switching to clean energy.
2. Lower Power Bills
- PPA tariffs are typically ₹4.5–5/unit, compared to ₹7–10/unit from the grid.
- Monthly savings of 20–40% directly improve cash flow.
3. Fixed Tariffs = Budgeting Confidence
- Enjoy predictable energy pricing for up to 25 years.
- Hedge against grid tariff hikes and market volatility.
4. No Maintenance Worries
- Developer handles all technical aspects — cleaning, repairs, performance monitoring.
- You focus on running your business while enjoying uninterrupted green power.
5. Green Energy = Better Brand & Compliance
- Meet ESG targets and attract eco-conscious clients.
- Align with export regulations that increasingly mandate clean energy use.
Case Study: Textile Unit in Tirupur, Tamil Nadu
- Monthly Power Need: 1.5 lakh units
- Grid Tariff: ₹7.8/unit → ₹11.7 lakh/month
- PPA Tariff: ₹4.8/unit → ₹7.2 lakh/month
- Monthly Savings: ₹4.5 lakh
- Annual Savings: ₹54 lakh
- 15-Year Impact: ₹8+ crore saved — without upfront investment
This real-world example shows how PPAs aren’t just eco-friendly — they’re profit-enhancing.
Addressing SME Concerns
“Will I lose control of my roof?”
No. The rooftop remains yours. The developer only uses the space to install panels.
“What if solar stops working?”
PPAs come with performance guarantees. If the system underperforms, it’s the developer’s responsibility — not yours.
“Is solar reliable enough for my operations?”
Yes. Solar works efficiently across most of India. And you still stay connected to the grid, ensuring backup supply.
What’s Next: The Future of SME PPAs in India
India is making it easier for SMEs to access solar through:
- Simplified open access rules at the state level
- Faster DISCOM approvals for net metering and energy wheeling
- Policy support for group captive models in industrial clusters
- Increased investor interest in SME-focused solar portfolios
In the coming years, PPAs may become the default route for industrial solar adoption — especially in export-heavy sectors like textiles, pharma, and food processing.