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Main reason behind putting up a Rooftop Solar would be to save money on your electricity bills, Right? Here's how to calculate how long will it take to get your Investments returned.

Your Solar power plant is basically substituting your DISCOM by acting as your electricity provider. Generated units of electricity are 'Free' because you already own the plant. Cost of solar = Zero. Whereas, DISCOMs i.e MSEDCL, Tata Power, Adani, etc will charge you for each unit of electricity.

How do DISCOMs charge you?

If you think your DISCOM charges you only by the Energy Tariff? Then, you're probably wrong. When you turn to Page 2 of your electricity bill, you'll notice DISCOMs charge consumers on 5 parameters:

Demand charges ( Fixed charges): The minimum value DISCOM compulsorily charges. Even after Solar, you will have to pay for demand charges.

Energy charges: (Per unit tariff) * (Units consumed), as per defined slabs.
Wheeling charges: Rs 1-2 per unit consumption.
Electricity duty: 16% of above parameters.
Fuel and Coal charges (FAC): Rs 0-2 per unit consumption.

Considering all of these parameters, the actual cost of electricity is calculated. This is called Landed cost. It will be much higher compared to only the Energy Tariff.

Typically, In Maharashtra the landed cost for Home owners scale lies between Rs 9-13 per unit and for housing society scale, it ranges between Rs 14-18 but can go as high as up to Rs 20 as well.

The Subsidy factor:

Government subsidy greatly helps in keeping your ROI period low. One-time capital subsidy is disbursed after your project is commissioned. It is available only for residential consumers and it's value is different for home owners and Housing society projects.

Complete information is available on: https://solarrooftop.gov.in

Calculating ROI

Step 1: The total project cost: Project cost + GST - Subsidy value.

Example: For a 5kW project:

Project cost: Rs 3,00,000/-

GST @ 13.8%: Rs 41,400/-

Subsidy: Rs 58,358/-

Net investment: Rs 2,83,042

Step 2: Calculating Landed cost

As discussed above, let's say your landed cost is Rs 13.5 per unit.

Step3: Calculating yearly savings:

5kW plant shall generate at least 6500 units per year. Therefore, 6500 units * Rs 13.5 = Rs 87,750 will be your yearly savings.

Step 4: The ROI

ROI= (Total Investment)/( Yearly savings).

i.e Rs 2,83,042/ 87750 equals to 3.23 years.

Your Rooftop Solar's ROI period is 3.23 years. After which, all generated units is absolutely free!

Pro tip: A Renewable energy investment is worth doing when ROI period lies between 2-4 years.

Note:

Actual cost and electricity generation may vary as per design and site conditions.
Solar PV degradation and DISCOM price hikes will also affect your ROI calculations.
Plant's maintenance costs will also have to be considered.