Are solar panels worth the investment?
Senior Marketing Specialist
Using solar energy has become popular in recent years. The technology is constantly improving and the cost of solar is going down. Solar panels have seen a lot of advancement. The size is decreasing, and wattage is increasing constantly. New technology, availability of storage & easy access has helped in the promotion of solar energy as a major source of energy. Governments across the world are promoting solar use. The installed capacity of solar in the world at the end of 2020 was 700+ GW. The installed capacity is expected to increase by 150GW in 2021. In India, solar has reached many households. Now we need to figure out if solar is a good investment as compared to other available options.
To compare the worth of solar panels. We need to know a few things:
1. Cost Comparison of solar power and other options
2. Calculation of how the solar system pays for itself
3. Factors affecting Solar Payback Period
Cost Comparison of solar power and other options:
The conventional source of electricity charges around Rs. 6 to 9, depending on your location. Solar power generation costs very little as compared to other sources. The initial investment in solar PV saves money for 25 years.
1. Calculate the cost of electricity from conventional sources:
In order to calculate the cost of electricity, you need to know the utility rate in your area. The cost per unit of electricity is the utility rate. It varies from location to location. Once you are aware of the utility rate, check for unit consumption at the bottom of the electricity bill. You can calculate the average annual electricity cost by multiplying the consumption with the utility rate. Now calculate the cost of electricity per year with 25, to get the lifetime electricity cost.
Let's suppose the utility rate is Rs. 9/-
The average Annual consumption is 12000 units.
The annual electricity cost is Rs. 12000x9 = Rs. 1,08,000
Lifetime electricity cost = 1,08,000 x25 = Rs. 27,00,000
2. Estimate the size of the solar system
Depending on the average annual consumption of electricity, you can determine the size of the required solar system for your home. The size will be directly proportional to electricity bills. Once you know the requirement, you can use your average monthly bills to find out the unit requirement. Once you are aware of the monthly requirement, you can divide the number by 120. It will give you the size of the system required. We are using 120, as electricity generated per kW solar in a month is 120.
Your monthly bill is Rs. 9600 and the price per unit is Rs. 8.
Number of units required per month = 9600/8 = 1200
1kWp produces approximately 120 units of electricity per month
System size required = 1200/120 = 10kW
You will need a solar plant of 10 kWp, if you want to reduce your bill to zero.
3. Estimate the solar panel installation cost as per requirement.
The installation cost is directly proportional to the size of the plant. The cost per KW depends on the types of panels and inverters (string, string with optimiser, micro-inverter) used. A 10kWp comes in the price range of Rs. 5,00,000 to Rs. 6,50,000 (plus taxes)
4. Calculate your return on investment (ROI).
1. Subtract the lifetime cost of solar (step 7) from the lifetime cost of utility power (step 2). The result is your return on investment—the total amount you’d save on energy bills over 25 years.
To calculate the return on investment, subtract the cost of solar from the cost of electricity.
From point 1 :
The cost of electricity is Rs. 27,00,000/-
From Point 3:
The cost of Solar is Rs. 5,44,500/- to Rs. 7,07,850/-
Return on Invest: 27,00,000 - 5,44,500 = Rs. 21,55,500
Return on Invest: 27,00,000 - 7,07,850 = Rs. 19,92,150
Please note that the expensive system in this example is more efficient. The efficiency difference of the system has not been calculated. ROI after including the efficiency of the inverter will be more for the efficient system.
There are a few other factors that determine the efficiency of the Solar system :
1. Sun Exposure :
More exposure to the sun means a more efficient solar system.
2. Shadow on the roof
The shadow can decrease the efficiency of the system but it can be controlled. It may vary for different inverters.
3. Type of inverter
A system with a string inverter will have the efficiency of the lowest generating panel. But a system with a micro-inverter will have an efficiency of a normally generating panel.
4. Efficiency of solar panel
Different solar panels have different efficiencies. Polycrystalline solar panels have an efficiency of less than 17% whereas monocrystalline panels have an efficiency of over 21%.
By taking the above example into consideration, we can conclude that Solar Panels are worth the investment.
Senior Marketing Specialist
Rohit Grover is the Senior Marketing Specialist at Sunson Energy. He takes great pride in writing easy to understand content for everyone. He is a renewable energy enthusiast who has a keen interest in environmental protection.