Have you decided to install your residential rooftop solar system? Before you implement this decision, it is crucial to be aware of the most important concepts – solar ROI and payback period. Adding solar panels to your rooftop can be a safe and rewarding improvement as it can save you a lot once installed properly and safely. The time it takes to pay back the initial installation cost and other investments can be short based on your electricity cost.
Residential solar system installation at home pays your bills by almost 70-90%. Most homeowners invest in solar panels to reduce their dependence on power from the grid and save electricity bills. Moreover, they choose panels to decrease their carbon footprint and produce power sustainably. Your solar systems will provide key benefits as long as they receive a sufficient amount of sunlight, and your home is properly set up for systems.
In this post, you’ll explore the concepts of solar panel ROI and payback period in detail.
What is ROI and Payback Period?
Solar panel ROI (return on investment) is a measure of how solar installation cost compares to the income it produces. It is always denoted as the percentage of the initial investment cost. Understanding how to calculate solar panel ROI will help you understand whether the initial cost of investment is balanced out by your energy savings or the money you earn by selling power back to the grid.
To get an average of how much solar systems can help you in paying your bills, it’s good to calculate the rough estimate of solar ROI and payback period. Calculating these values will help you understand whether your devices offer the expected financial benefits. Remember, solar ROI and payback period are different terms. The payback period refers to the amount of time it takes to completely pay off solar panels through power savings.
Calculating Solar ROI
The ROI of solar panel installation depends on various factors. So, consider all important factors affecting solar ROI like installation costs, inspection charges, weather conditions, efficiency, maintenance costs, etc. during calculation. To calculate solar ROI, divide the net profit over your solar panel’s lifetime by the initial purchase and installation cost. Now, multiply the outcome by 100. The result will show the projected ROI of your solar system denoted as a percentage.
Calculating Solar Payback Period
To calculate an accurate solar payback period, consider vital factors. It includes total cost, average power usage, tax incentives, power production, and utility cost and an increase rate in that cost. When considering the minimum lifespan of 25 years, the payback period less than half of that durability, can be considered a good payback period.
In India, the solar installation payback period is less than 2-3 years. To calculate the payback period for your solar systems, consider how much power your home consumes daily, monthly, or annually. See the number of units consumed for a particular time in your electricity bill.
For instance, your home consumes 400 units per month. Now, decide on the estimated solar panel size. To meet the average power requirements of 400 units, installing a 3-kilowatt solar system is good. Be sure your home has 250-300 square feet of shade-free space for installation.
The cost of the solar panel depends on its size and subsidy in your state. Contact the best rooftop solar system providers in Delhi NCR to choose the right system and know the subsidies in your area. A large solar panel will cut the cost per kilowatt and produce a significant amount of power, providing better and faster payback. A 3-kilowatt solar system will cost around INR 90,000.
Based on the example we take, a 3-kilowatt solar system can produce 360 units per month. A 1-kilowatt solar system can produce 4 units of power daily. On average, if your home consumes 400 units, your solar panels will provide about 90% of power. This means you have to pay only the remaining 10% i.e. 40 units to your electricity board.
If the electricity tariff rate in your area is INR 7, then you just need to pay INR 280. Your solar panels will produce enough power worth INR 2,520 monthly, providing cost savings of INR 30,240 yearly. The payback period will be INR 90,000/INR 30240 = 2.97 i.e. around 3 years. Remember, this payback period is not fixed. It can vary based on different factors, as mentioned earlier.
Average Solar Panel Installation Cost for Homes
The initial solar investment includes the cost of solar components, labor, and panel mounting modules. Residential properties with maximum solar access can recover their installation cost in almost 6-8 years. The solar payback period depends on the utility costs, the size of the home, and the payment method.
Installing a 3-kilowatt solar panel costs a national average of INR 1,90,000 – 2,15,000. Per-watt cost for solar systems can vary from INR 75-85 in India. Before calculating your solar panel installation cost, first, evaluate your electric bill. The higher the bill, the more advantageous the installation will prove. The electric tariff rates and electricity consumption are volatile. The power savings can vary based on the fluctuations in the electricity cost. Changes in power usage also impact the savings amount.
Secondly, decide how much solar energy output you can enjoy with solar installation in average sun hours. Alongside sun hours, the energy output depends on roof age and type, the roof’s orientation toward the sun, and shadow-free space. Also, take advantage of a government solar subsidy scheme to have more financial savings.
Finally, estimate and compare the cost of different solar panels and related components. The reduced long-term costs of solar panel system maintenance can compensate for better initial investment. Advanced solar systems are designed to effectively last for at least 25 years with frequent cleaning and maintenance needs. By availing of an annual maintenance contract for solar system, users don’t notice a drastic change in solar power production during the panel’s lifespan.
Final Words
In conclusion, it is worth installing solar panels at home to reduce carbon emissions and electric bills and increase home value. As you read above, the initial installation cost is high, the solar subsidy scheme helps recoup this cost. Now that you know how to calculate the installation cost, return on investment, and payback period of the required solar panels, you can make the right solar decision.
If you want to learn more about which brand of solar panels are right for you and how you can get them installed safely, reach Megamax Solar. The experts will provide free consultation to assist you with an informed solar decision and get a seamless and secure solar installation.