Solar Payback in Pakistan | Return On Investment (ROI) Calculated Practically

The primary reason many people are installing solar panels is to save money by reducing their electricity bills.

Before making the investment, it’s natural to wonder how long it will take to recover the costs.

While most online sources claims a 3-5 year return on investment for solar in Pakistan, these claims often lack practical calculation.

In this post, we’ll calculate the actual ROI and payback period for a 10KW on-grid solar system installed in Talagang city.

By following this detailed (and unique) guide, you’ll gain a clear know-how of the entire process.

What is the Key Factor That Influence Solar Payback?

Before practically going into calculations, remember that solar energy is not a one-size-fits-all product.

Every home or business has its own energy usage patterns that greatly affect the return on investment.

The more you utilize your own solar energy (instead of exporting it to Wapda), the higher the return on investment will be.

Why is that?

Because using WAPDA electricity costs you Rs. 42/KWh (Off-peak unit rate in August 2024), but exporting the same units to the grid results in savings of just Rs. 19/KWh.

I hope you got it.

Calculating the Cost of a 10KW On-Grid System

This setup includes Longi 540W solar panels and a 15KW Growatt on-grid inverter, along with other installed equipment.

Here is the quick cost breakdown of each component that contributes to the overall solar setup cost.

Cost of Solar Panels

The consumer purchased 18 No. Longi solar panels (540W each) at a price of Rs. 26500 per panel in 2023. So the total cost of panels is Rs. 477,000.

Price of Inverter:

This setup has a 15KW Growatt inverter, which was purchased for Rs. 290,000.

Cost of Electrical Wiring:

The total expenditure on solar wiring and safety device installation is about Rs. 55,000. This includes a bundle of Fast cable 4mm DC wire, DC breakers, and an outdoor isolator switch for manual solar disconnection from the grid.

Cost of Mounting Structure:

You may have noticed (see picture below) that the mounting used here is an elevated structure instead of an L2 structure, which costs a little more than L2. The total price incurred on it is Rs. 110,000.

Net Metering Charges:

Net metering includes the extension of load charges and demand notice for the green meter. The overall expenditure was Rs. 90,000.

Installation Charges:

The system was installed by Advanced Solution (a solar company), which charged Rs. 3/Watt. This accumulates to Rs. 30,000.

Here is a snapshot of the 10KW solar setup that is under consideration.

Total System Cost

Adding up the aforementioned costs equals the total expenditure for this on-grid solar system, which is Rs. 1,060,000.

Calculating Monthly Bill Savings of a 10KW System

After installation, the first consumer billing began in June 2023. Keep in mind that the green meter bills are issued quarterly every three months.

To make things easy to understand, I’ve worked out the monthly bill calculation using solar units generated, units consumed by the owner itself, units exported to Wapda, units imported at off-peak, and units imported at peak.

Here is how the whole process goes:

Based on these calculations, the upcoming lines depict a full year of consumption and savings from June 2023 to May 2024.

First Quarter: June to August

The third column displays the bill without solar.

This is calculated based on the assumption that these units were consumed from the utility grid (Wapda) in the absence of solar panels, and the peak and off-peak unit rates utilized in the above calculations were applied.

You can notice here that in August, solar generated units were lower than the other months due to cloudy weather, which impacted the solar panel production accordingly.

Second Quarter: September to November

It’s worth noting that solar generation is higher in October, which makes sense.

As solar panels operate with the highest efficiency at an optimum temperature of 25-30°C, and that’s exactly the temperature range experienced in October.

Third Quarter: December to February

This is the solar generation and bill-saving situation in the 3rd quarter.

You can see that the production decreases significantly due to the seasonal effects and fewer sun rays available to panels.

Interestingly, solar savings were quite low in December 2024.

In December, there was huge load-shedding in the area from 9 am to 2 pm due to maintenance work on 11kv feeders.

And same is the time of solar generation. Due to less usage in winter at that time in the home, the excess solar energy couldn’t be exported to the grid due to the non-operation of the on-grid system in load shedding.

That is one potential drawback of on-grid.

Fourth Quarter: March to May

In this whole quarter, solar panels produced the maximum energy, and the reason is the same—the best temperature for solar production.

One more thing is evident that monthly savings are much higher than in other months.

There are two underlying causes: the maximum solar generation and minimum energy consumption in these months.

And due to the electricity unit price increase in May 2024.

What’s the Final Payback Period?

Now, onto the final point—the solar payback period. For that totaling all the expenses (mentioned above) and adding the calculated monthly savings, we will obtain:

Total System Cost = Rs. 1,060,000

Total Anual Savings = Rs. 414,700

Payback Period = Total System Cost / Total Anual Savings

Payback Period = Rs. 1,050,000 / Rs. 414,700

Payback Period = 2.55 Years or 30 Months

So, we can conclude that the total amount consumers invested in this 10KW in-grid solar system will be recovered in 30 months.

What is the Return on Investment Per Year?

Return on investment refers to the amount a consumer will receive from their total system cost in a year.

We’ll calculate it from this simple formula:

ROI Per Year = (First Year Savings / Total System Cost ) × 100

ROI Per Year = (Rs. 414,700 / Rs. 1,050,000 ) × 100

ROI Per Year = 39 %

Each year, the consumer will receive 39% of their total investment in the form of monthly bill savings, which will be completed in 2.5 years.

What’s the Expected Payback for Solar Installed in 2024?

The current increase in the price of electricity in August 2024 is as follows: off-peak from Rs. 26 to Rs. 42 and the peak rate from Rs. 33 to Rs. 48.

With this increase, the monthly bill savings will be large as you now depend less on grid electricity.

Also, solar panel prices have decreased sharply. Let’s say last year, tier-one panel prices were Rs. 72 per Watt, and now, in 2024, they are at Rs. 38 per Watt.

Both these factors will result in a decreased payback period, meaning that your investment will be recovered more quickly than 30 months (for an on-gris setup).

Concluding Thoughts

To bring it all together, Investing in solar panels offers a good return, as this case study demonstrates.

To be more precise, the exact return on system type and your energy usage patterns.

And the icing on the cake is the continuously decreasing prices of solar panels, which will further reduce the payback period.

Frequently Asked Questions