TANGEDCO Grid Power vs. Solar: A 10-Year Levelized Cost of Energy (LCOE) Comparison

When evaluating whether solar makes financial sense, most people compare today's electricity bill with the cost of a solar system. That comparison, while useful, misses a critical dimension: time. Grid electricity costs increase every year, while solar costs are fixed at installation. To make a truly apples-to-apples comparison, you need to calculate the Levelized Cost of Energy (LCOE) -- the total cost of electricity from each source spread over the system's lifetime.

This analysis compares the 10-year LCOE of TANGEDCO grid electricity against rooftop solar for domestic, commercial, and industrial consumers in Tamil Nadu, using 2026 costs and realistic assumptions.

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What Is LCOE and Why Does It Matter?

LCOE represents the per-unit cost of electricity when you account for all costs over the system's lifetime:

LCOE = Total Lifetime Cost / Total Lifetime Energy Generated (or Consumed)

For grid electricity, total cost includes energy charges, fixed charges, fuel cost adjustments, and any annual tariff increases over 10 years.

For solar electricity, total cost includes system purchase cost (after subsidy), maintenance costs, inverter replacement (if needed within 10 years), and any financing costs.

LCOE gives you a single number that answers: "Over the next 10 years, what will each unit of electricity actually cost me?"

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Assumptions for This Analysis

Parameter	Value	Basis
Analysis period	10 years	Conservative; solar panels last 25+ years
TANGEDCO tariff escalation	5% per year	Historical average (conservative)
Solar panel degradation	0.5% per year	Manufacturer specification
Discount rate	8%	Opportunity cost of capital
Location	Tamil Nadu average	4.2 units/kW/day generation
Maintenance cost	Rs 4,000/year (residential), Rs 15,000/year (commercial)	Including cleaning and inspection
Inverter replacement	Not needed within 10 years	String inverters warranted for 10 years

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Domestic Consumer: 10-Year LCOE Comparison

Profile: 3BHK Home Consuming 700 Units Bi-Monthly (350 Units/Month)

Grid LCOE Calculation:

Year	Tariff Slab	Effective Rate (Rs/unit)	Annual Grid Cost
1	601-800 bi-monthly	5.50	23,100
2	(+5% escalation)	5.78	24,276
3		6.07	25,494
4		6.37	26,754
5		6.69	28,098
6		7.02	29,484
7		7.37	30,954
8		7.74	32,508
9		8.13	34,146
10		8.54	35,868
Total			Rs 2,90,682

10-year grid LCOE = Rs 2,90,682 / 42,000 units = Rs 6.92/unit

Solar LCOE Calculation (3 kW system):

Cost Component	Amount
System cost (after Rs 78,000 subsidy)	Rs 1,12,000
10-year maintenance cost	Rs 40,000
Total 10-year cost	Rs 1,52,000

Total 10-year generation (3 kW x 4.2 units/day x 365 days x 10 years, adjusted for 0.5%/year degradation): 44,800 units

10-year solar LCOE = Rs 1,52,000 / 44,800 units = Rs 3.39/unit

Domestic LCOE Summary

Source	10-Year LCOE	10-Year Total Cost
TANGEDCO grid	Rs 6.92/unit	Rs 2,90,682
Rooftop solar (after subsidy)	Rs 3.39/unit	Rs 1,52,000
Savings with solar	Rs 3.53/unit (51%)	Rs 1,38,682

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Commercial Consumer: 10-Year LCOE Comparison

Profile: Shop/Office Consuming 3,000 Units/Month on LT-3 Tariff

Grid LCOE Calculation:

Year	Effective Rate (Rs/unit)	Annual Grid Cost
1	7.00	2,52,000
2	7.35	2,64,600
3	7.72	2,77,920
4	8.11	2,91,960
5	8.52	3,06,720
6	8.95	3,22,200
7	9.40	3,38,400
8	9.87	3,55,320
9	10.36	3,72,960
10	10.88	3,91,680
Total		Rs 31,73,760

10-year grid LCOE = Rs 31,73,760 / 3,60,000 units = Rs 8.82/unit

Solar LCOE Calculation (20 kW system, no residential subsidy):

Cost Component	Amount
System cost (20 kW, commercial -- no PM Surya Ghar subsidy)	Rs 10,00,000
10-year maintenance cost	Rs 1,50,000
Total 10-year cost	Rs 11,50,000

Total 10-year generation: 2,99,000 units (20 kW system does not fully offset 3,000 units/month; sized to 83% of consumption)

10-year solar LCOE = Rs 11,50,000 / 2,99,000 units = Rs 3.85/unit

Commercial LCOE Summary

Source	10-Year LCOE	Savings
TANGEDCO grid	Rs 8.82/unit	--
Rooftop solar	Rs 3.85/unit	Rs 4.97/unit (56%)

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Industrial Consumer: 10-Year LCOE Comparison

Profile: Factory Consuming 15,000 Units/Month on HT-1 Tariff

Grid LCOE Calculation:

Year	Effective Rate (Rs/unit)	Annual Grid Cost
1	7.20	12,96,000
2	7.56	13,60,800
3	7.94	14,29,200
4	8.34	15,01,200
5	8.76	15,76,800
6	9.20	16,56,000
7	9.66	17,38,800
8	10.14	18,25,200
9	10.65	19,17,000
10	11.18	20,12,400
Total		Rs 1,63,13,400

10-year grid LCOE = Rs 1,63,13,400 / 18,00,000 units = Rs 9.06/unit

Solar LCOE Calculation (100 kW system):

Cost Component	Amount
System cost (100 kW)	Rs 42,00,000
Accelerated depreciation tax saving (40%, 25% bracket)	-Rs 4,20,000
10-year maintenance cost	Rs 3,00,000
Net 10-year cost	Rs 40,80,000

Total 10-year generation: 14,95,000 units

10-year solar LCOE = Rs 40,80,000 / 14,95,000 units = Rs 2.73/unit

Industrial LCOE Summary

Source	10-Year LCOE	Savings
TANGEDCO grid	Rs 9.06/unit	--
Rooftop solar (with AD benefit)	Rs 2.73/unit	Rs 6.33/unit (70%)

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LCOE Comparison Across All Consumer Types

Consumer Category	Grid LCOE (10-year)	Solar LCOE (10-year)	Savings %	10-Year Net Savings
Domestic (high slab)	Rs 6.92	Rs 3.39	51%	Rs 1,38,682
Commercial (LT-3)	Rs 8.82	Rs 3.85	56%	Rs 14,85,000+
Industrial (HT-1)	Rs 9.06	Rs 2.73	70%	Rs 95,00,000+

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What Happens After 10 Years?

This analysis deliberately uses a conservative 10-year window. But solar panels continue generating for 25+ years. After Year 10:

• Grid LCOE continues rising (Year 15 rate at 5% escalation: Rs 11.50+/unit)
• Solar LCOE drops further because the system is already paid off. The only ongoing cost is maintenance (Rs 4,000-15,000/year). Effective solar cost in Years 11-25 drops to Rs 0.50-1.50/unit.
• If you extend the LCOE to 25 years, solar LCOE falls to Rs 1.50-2.00/unit while grid LCOE rises to Rs 10-12/unit. The gap widens dramatically.

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Sensitivity Analysis: What If Assumptions Change?

Scenario	Impact on Solar LCOE	Impact on Grid LCOE	Net Effect
Tariff escalation 3% (instead of 5%)	No change	Grid LCOE drops to Rs 6.10	Solar still cheaper by Rs 2.71/unit
Tariff escalation 7%	No change	Grid LCOE rises to Rs 7.80	Solar savings increase
Solar system cost 20% higher	LCOE rises to Rs 4.07	No change	Solar still cheaper
Lower irradiance (coastal Chennai)	LCOE rises to Rs 3.80	No change	Solar still cheaper
No subsidy (domestic)	LCOE rises to Rs 4.25	No change	Solar still cheaper

In every reasonable scenario, solar LCOE remains below grid LCOE over a 10-year period for consumers paying Rs 4+/unit.

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Use This Analysis for Your Decision

The LCOE framework removes the confusion of comparing an upfront cost (solar) with a monthly recurring cost (grid). It gives you one number that captures the true economics over time.

Use our solar savings calculator to generate a personalised LCOE comparison based on your actual consumption and tariff category, or contact Tristar for a detailed financial analysis with year-by-year projections for your specific situation.