How to Calculate Payback Period for Solar Panels in india | Freyr Energy

How to Calculate Solar Payback Period?

Not many investments are as risk-free and profitable as installing a solar system. Today, the payback period of solar installation is as less as 2 to 3 years.

Payback period is the time taken to break-even or to get back your solar investment. Calculating the payback period for solar panels in India is easy but you need to understand certain components of the investment before you begin.

Solar Panel Payback Period

The payback calculated will vary with factors such as system size, cost, electricity generation & consumption, etc. Today, solar is the only investment in the market that can give you a payback period of 2 to 3 years with assured returns. Other factors such as increasing grid electricity tariffs, availability of financial incentives, net-metering, and ease of installation with EPCs like Freyr Energy are urging many homeowners and businesses to choose Solar over traditional forms of energy.

Frequently Asked Questions

The time it takes to pay for the installation of solar panels through overall electricity bill reductions and other incentives is known as the solar panel payback period. In India, the average solar panel payback period falls between six to ten years and depends on other factors.

The following factors may affect the solar power payback period.

  1. Subsidies.
  2. Annual savings on electricity bills.
  3. Electricity bills are offset through net metering.
  4. Solar radiation levels.
  5. Overall system efficiency.

You can calculate solar payback period as follows:

Divide the total solar system cost by the amount you save on your yearly electricity bills. It gives you the total payback period. Suppose your total system cost is Rs. 1,00,00. You save Rs. 30K every year on your electricity bills. Then the total payback period solar is approximately 3.3 years.

The average solar payback period in India is approximately six and ten years. However, it may vary due to a few factors. Consider factors like sunlight in your region, solar system size, number of batteries, electricity production, and consumption. It also depends on how you maintain your solar panel system. A few can achieve the payback period within 2 to 3 years of installation. At the same time, others take around 10 to 12 years or more.

Total solar panel payback period calculator formula:

Total payback period = t

Total cost of solar system = c

Total yearly savings on your electricity bills = s

Formula: t =c/s

A good payback period for solar panels in India is considered when you can cover the total solar panel investment cost within half of its total lifespan. It means the amount you save on your electricity bills must match the total solar panel investment amount at the max in 12 years.

Payback time is the period when your saved amount on electricity bills over the years matches the total investment cost for installing a solar panel system. The solar payback time on average is six to ten years.

ROI means return on investment. It is the amount you save and earn against your solar panel installation investment.

The discounted payback period for solar panels considers the time value of money. Hence, it is longer than the simple payback period. A rupee saved in the future is worth less than a rupee saved today.

The carbon payback period deals with the duration taken by solar systems to offset carbon emissions with clean air. It means the time taken by solar systems to generate plenty of clean air, is much more than the polluted air.

You can calculate solar ROI as follows:

  1. Note the total cost of ‘total cost’ for solar system installation investment.
  2. Add maintenance and repair charges to it.
  3. Subtract subsidy amount, tax credits, and rebates.
  4. Now you can calculate the ‘total benefit’.
  5. Note the annual savings on electricity bills.
  6. Add money earned through net metering.
  7. Now, calculate the ‘net benefit’ = ‘total benefit’ – ‘total cost’
  8. ROI calculation = (‘net benefit/total cost) * 100

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