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.

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

• Average electricity bill and power consumption: How much electricity do you consume per day, month or year? This can be found in your electricity bill. The electricity bill mentions the number of units consumed by you for the given period. For further estimation let us assume your average electricity consumption per month is 400 units.
• Solar system size estimate: Depending on the electricity consumed by you, you will get an estimated solar system size. If you consume an average of 400 units, installing a 3kW should offset your consumption from the grid. For installing the system you will require 250- 300 sq. ft of shadow-free space. 

• Cost of the solar system: The solar system's cost depends on its size. Having a larger solar system reduces the system costs per kW and generates a large amount of electricity resulting in faster payback. A 3kW solar system costs around ₹99,190 with a subsidy in Telangana as of Feb 2021. Now let us see in how many months or years this system can pay for itself or what its payback period is. 

• Amount saved: Depending on the amount of sunlight or irradiation level of the sun, the solar system will generate electricity. On average, a 1kW system can generate 4 units of electricity per day. So, a 3kW system can generate 360 units in a month. Now on average if you consume 400 units, the solar system will supply 90% of your electricity. You just need to pay for the remaining 10% or 40 units to the electricity board. Assuming, grid tariff rates of Rs. 7/-, you have to pay only Rs. 280 and your system generates electricity worth Rs. 2,520 every month. This means you save Rs. 30,240 every year. 

• Payback period: As we worked out some averages above, the payback period for the assumed installation can also be calculated. If a 3kW system costs ₹99,190 in Telangana and you save ₹30240 every year then for the solar system to pay back itself it will take ₹99,190 / ₹30240 = 3.2 years. 

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.