Are you planning to install solar panels? If so, then you must understand the solar ROI. Opting for solar panels might look expensive, so it is best to know the return you will get in the future. This will help you make the right decision. However, there is no saying how early you will get the returns. Multiple homeowners have benefited from solar panels. More than a sunny day, the solar panel ROI depends on the panel size and location, installation fees, maintenance, etc.
In this guide, you will find different formulas that will help you calculate the ROI of solar installation and show the variables that impact the process. But before that, let’s understand the long-term return of solar panels.
The Story Behind Return from Solar Panels Installation
From the solar panel investment you make, there is a chance you will be able to break even or save more considering the array of benefits that solar panels provide.
The government is providing reasonable subsidies for every Indian to opt for Solar Panels
After the recent MNRE notification, it is clear that the government has increased the previous subsidy making it easier for us to install solar panels. You can accelerate the solar payback period with other government incentives. With this, you won’t have to pay in full yet reap the benefits of renewable energy conservation.
Your Electricity Bills will be Reduced Drastically
As many of you might know the PM had promised to offer citizens a chance to make their electricity bills zero. You might be wondering, how can your electricity bill be zero, right? Well, it is very simple. Depending on your unit and location, you have to pay a fixed charge for your meter, however, the rest of the criteria will only be payable if you use extra electricity. To explain it simply, if your export unit is more than your import unit you can also receive a bill that is in credit.
Solar Panels can Increase the Value of your Property
Many buyers look for sustainable energy units, hence, solar panels ROI increases the price of your property and helps sell the property like hotcakes. If you are lucky you will also find people who are willing to pay more money for your property considering the solar ROI return on investment in the long run.
Here is a Formula to Calculate the Period of Solar Returns
Did you know that your investment in a solar power system can pay off over time? It’s true! The time it takes to revamp your initial investment is called the returns period, and for many homeowners, it’s around 8 to 10 years.
During this time, even though your solar panels generate electricity from the sun’s rays certain drawbacks affect the solar panel ROI. Factors like the amount of sunlight your area receives, the size of your solar array, and other variables can influence how long it takes to break even.
But once you’ve reached that point, it’s smooth sailing. Your solar panels continue to produce clean, renewable energy, and you start to see returns on your investment.
Solar Payback Formula
To calculate the solar payback you can follow this solar ROI calculator formula:
(Initial Cost) / (Annual Savings) = Solar Payback Period
For example, say your solar panels cost Rs. 80000. But, now that you are using solar panels your yearly saving is say Rs. 8000. So, you paid Rs. 80,000 and you are saving Rs. 8000 so your period of solar payback should be 10 years.
The formula for Calculating Solar Panel ROI
Solar panel return on investment is related to the time for solar payback. In place of evaluating the time taken, through ROI on solar panels the total cost and savings can be determined.
Solar panels return on investment calculator uses this formula-
Lifetime utility costs – lifetime solar costs = Solar System ROI
To get an accurate answer, you will have to find out the utility costs and the cost of solar units throughout their lifespan (such as maintenance, repair, and replacement costs).
The Variables that Impact Solar ROI
There are several factors to keep in mind:
Considering the costs of installation:
– The initial cost might seem bulky. It can also cross Rs. 2 Lakhs or more for a residential system.
– But if you add the government subsidy into this equation, your installation cost will also come down.
Solar Panels need to be well maintained:
– Solar panels can be sturdy, but there is no saying that wiring or connection won’t fail. It is best to keep a check on your solar units.
– You will get at least 25-30 years before major maintenance work is done.
– We can hope that the replacement parts will cost less as demand for solar panels increases.
Necessary Permits and Fees:
– In some states, you may need permits or fees for safe installation and fair participation in net metering programs.
– In the long run, even these costs will be outweighed by the benefits of solar energy.
Scoping the Duration Needed Get a Payback
If you want to install solar panels for a home in India, the cost can range from ₹1.5 lakh to ₹5 lakh or more, depending on the type of system you install and the government subsidies you avail. For your understanding let’s say a 1 kW solar unit is ₹65,000–₹75,000, a 2 kW solar unit costs ₹1,40,000–₹1,50,000, and a 3 kW unit costs ₹1,89,000–₹2,15,000 on average.
Now let’s understand the subsidies being provided by the government. The MNRE notification says- for up to 3 kW the subsidy will be Rs. 14588/- per kW, above 3 kW and up to 10 kW it will be Rs. 14588/- per kW (for the first 3 kW, and then Rs. 7294/- per kW). If you opt for above 10 kW you will get a subsidy of Rs. 94822/- which is a fixed rate.
So, if we put the above data in the solar panel ROI calculator, we will find the period in which you expect a reasonable return.
Will Solar Panels be Worth the Investment?
If you live in an area with sunlight, consider installing solar panels. Many homeowners have already received a return on their investment, and now it is time for you to change. In an estimate of 10 – 15 years, you will get your ROI. If your budget is tight, consider investing in a smaller system such as a solar generator. It can be a breeze of relief when there is no power.
