How long does solar take to pay for itself?
You can do this on the back of an envelope. Here is the version that does not flatter the answer.
The short version
- • Payback is system cost divided by yearly saving.
- • The saving is not your whole bill. Fixed charges stay.
- • Units you sell back are worth about a third of the ones you use.
Everyone selling solar has a payback number. Most are worked out the flattering way.
The sum is simple: system cost divided by yearly saving. Getting the saving right is the whole job.
Three things that make it honest
- Units you use are worth more than units you sell. What you use yourself saves you the full rate. What you export is bought back at about a third of that.
- Fixed charges stay. Meter rent does not go away, so your bill never reaches zero.
- Budget for one inverter replacement. It is the part that gets replaced during the system's life.
A worked example
These numbers are made up. Put your own quote and bill in their place.
| Step | Number |
|---|---|
| Your bill today | Rs 25,000 a month, so Rs 300,000 a year |
| System covers about 80% | Rs 240,000 a year |
| Minus fixed charges you still pay | About Rs 226,000 a year |
| System cost, from your quote | Say Rs 1,000,000 |
| Payback | 1,000,000 ÷ 226,000, so about 4.4 years |
Tariff rises shorten this. Panels slowly losing output lengthens it. In the early years they roughly cancel out.
If you are borrowing
The question changes. It is no longer how many years. It is whether the monthly instalment is smaller than the bill it replaces.
If it is, you are better off from the first month, and you own the system at the end.
Compare offers on the total paid over the whole term, including fees. A longer term always makes the monthly number look better while costing more.
The 0% instalment plan
A company offering interest-free instalments has usually put the cost into the equipment price. Compare their instalment total against another company's cash price, not against their own.
It does this sum with sunlight figures for your area, and shows its assumptions.
Work out my payback