Sizing, Payback Examples and Checklists
Solar payback worked examples: 1 kW, 3 kW and 5 kW systems with PM Surya Ghar subsidy
Step-by-step payback arithmetic for 1 kW, 3 kW and 5 kW home rooftop systems in India, with subsidy, tariff, surplus and 25-year savings, all marked illustrative.
With illustrative prices and tariffs, a subsidised 3 kW on-grid system in India pays back in about five years, a 1 kW system in about six, and an unsubsidised extra beyond 3 kW, as in a 5 kW system, in about five and a half, provided most units replace power you would buy at ₹5–7. If the units replace cheap or free power, payback can double. The examples below show every step so you can repeat them with your own quotation and bill, or enter the figures in the solar payback calculator. None of the prices are quotes; they are round numbers chosen to show the method.
Common assumptions
| Assumption | Value used (illustrative) | Replace with |
|---|---|---|
| Generation per kW per year | 1,300 units | Vendor's site-specific estimate |
| Price per kW incl. GST | ₹70,000 (1 kW), ₹60,000 (3 kW), ₹60,000 (5 kW) | Your written quotations |
| CFA | ₹30,000 per kW for 2 kW + ₹18,000 for the 3rd kW, cap ₹78,000 | Portal subsidy calculator |
| Avoided rate | Your top-slab rate for units you no longer buy | Your tariff order and bill |
| Surplus rate | ₹2.50 per unit (only where surplus remains) | Your SERC's rate for surplus |
| Tariff rise | 2% a year | Your judgement |
The CFA figures are from MNRE's published scheme pattern for general-category states. Everything else is an example.
Example 1: 1 kW for a small household
A household uses about 130 units a month (1,560 a year), with its top units at an illustrative ₹5.00.
- Installed price: ₹70,000.
- CFA: 1 × ₹30,000 = ₹30,000.
- Net cost: ₹40,000.
- Generation: 1 × 1,300 = 1,300 units, all below annual use, so no surplus.
- Saving: 1,300 × ₹5.00 = ₹6,500 a year.
- Simple payback: ₹40,000 ÷ ₹6,500 ≈ 6.2 years.
The subsidy covers 43% of the price, but the high price per kW of a very small system offsets that.
Example 2: 3 kW for a typical family
A household uses about 330 units a month (3,960 a year), with an average avoided rate of ₹5.40.
- Installed price: 3 × ₹60,000 = ₹1,80,000.
- CFA: ₹60,000 + ₹18,000 = ₹78,000.
- Net cost: ₹1,02,000.
- Generation: 3 × 1,300 = 3,900 units, slightly below use.
- Saving: 3,900 × ₹5.40 = ₹21,060 a year.
- Simple payback: ₹1,02,000 ÷ ₹21,060 ≈ 4.8 years.
Over 25 years
With a 2% yearly tariff rise and an assumed 0.5% yearly fall in output, the yearly saving grows by about 1.5% a year. The total over 25 years is about 21,060 × 30 ≈ ₹6.3 lakh. Subtract the net cost (₹1.02 lakh) and an illustrative inverter replacement around year 12 (₹30,000): the net gain is roughly ₹5 lakh, before loan interest.
Example 3: 5 kW for a large house
A household uses about 500 units a month (6,000 a year), with its top units at an illustrative ₹6.50.
- Installed price: 5 × ₹60,000 = ₹3,00,000.
- CFA: capped at ₹78,000.
- Net cost: ₹2,22,000.
- Generation: 5 × 1,300 = 6,500 units. Use is 6,000, so 500 units surplus.
- Saving: 6,000 × ₹6.50 = ₹39,000, plus 500 × ₹2.50 = ₹1,250. Total ₹40,250 a year.
- Simple payback: ₹2,22,000 ÷ ₹40,250 ≈ 5.5 years.
The larger system pays back reasonably only because this household's top units are expensive. The 500 surplus units earn far less than the units it uses itself.
Side-by-side
| 1 kW | 3 kW | 5 kW | |
|---|---|---|---|
| Installed price | ₹70,000 | ₹1,80,000 | ₹3,00,000 |
| CFA | ₹30,000 | ₹78,000 | ₹78,000 |
| Net cost | ₹40,000 | ₹1,02,000 | ₹2,22,000 |
| Subsidy share of price | 43% | 43% | 26% |
| Yearly saving | ₹6,500 | ₹21,060 | ₹40,250 |
| Simple payback | 6.2 yrs | 4.8 yrs | 5.5 yrs |
Sensitivity: what moves payback most
Take Example 2 and change one input at a time.
| Change | New yearly saving | New payback |
|---|---|---|
| Avoided rate ₹3.00 instead of ₹5.40 | ₹11,700 | 8.7 yrs |
| Avoided rate ₹7.00 | ₹27,300 | 3.7 yrs |
| Generation 1,100 units/kW (shading, cloud) | ₹17,820 | 5.7 yrs |
| Price ₹2,10,000 instead of ₹1,80,000 | ₹21,060 | 6.2 yrs |
| No CFA (non-DCR modules) | ₹21,060 | 8.5 yrs |
The avoided rate and the subsidy move the result most. That is why households with large free-unit entitlements, or anyone tempted by non-DCR modules, should run the numbers carefully. The DCR rules are in DCR modules, ALMM and BIS.
Adding a loan
If Example 2 is financed with ₹1,60,000 at 6.00% (the scheme rate with the repo rate at 5.50% in October 2026) for seven years, interest is about ₹36,300. Payback on total cash outlay (net cost plus interest) stretches to about 6.6 years, or nearer 5.3 years if the subsidy is used to prepay the loan as soon as it arrives. See solar loans from public sector banks.
Adding a battery
A lithium battery adds a large cost without adding generation. If a 5 kWh battery adds an illustrative ₹1,20,000 to Example 2, simple payback rises to about 10.5 years, and the battery may need replacing within the period. The value of a battery is backup during outages, not faster payback. See home batteries.
Back to the pillar guide: how many kW of solar you need. Also see net metering vs gross metering and the solar quotation checklist.
Frequently asked questions
Why use my top-slab rate instead of my average rate?
Telescopic tariffs charge the top block of units at the highest rate; solar removes units from the top first. For a large reduction, solar may push you down through several slabs, so use the average rate of the units removed.
Should I include fixed charges in the saving?
No. Fixed charges usually stay on the bill.
What about panel degradation?
Panels lose a little output each year. The 25-year example includes an assumed 0.5% a year; check your module's warranty.
Is a five-year payback good?
For a 25-year asset, a payback under about a third of its life is generally attractive, but compare it with your other uses for the money.
Official sources
- PM Surya Ghar national portal — subsidy calculator
- Ministry of New and Renewable Energy — scheme guidelines
- Your SERC's tariff order — the rates you avoid and the surplus rate
