How to Calculate Solar ROI Properly (and Spot a Padded Projection)

Start with annual generation: installed capacity in kW multiplied by your location's specific yield. In the Jaipur region that is roughly 1,600 kWh per kWp per year; in Jodhpur or Bikaner nearer 1,750; in Udaipur or Kota nearer 1,570.

Then annual saving: generation multiplied by the tariff you actually displace. Then net cost: installed cost minus any subsidy. Then simple payback: net cost divided by annual saving.

For a 5 kW residential system in Jaipur: 5 × 1,600 = 8,000 units; at ₹7 that is ₹56,000 a year; net cost after the ₹78,000 subsidy is around ₹2,20,000; payback is about 3.9 years. That is the honest headline number.

Tariff escalation. Assume electricity prices rise 5% a year and a nine-year payback becomes seven. The assumption may even prove correct — but it is a forecast about regulatory policy, not a property of your solar system, and it does not belong in the headline number.

We model payback at a flat tariff and show escalation as a sensitivity, not as the base case. If a proposal's payback figure only works with escalation baked in, the system is marginal.

Degradation is real: modules lose roughly 1–2% in the first year and 0.4–0.55% annually after that. Over twenty-five years a plant delivers meaningfully less than year-one output multiplied by twenty-five.

Soiling is larger and more controllable. In Rajasthan an uncleaned array loses 5–15% of output, more in quarry, agricultural or desert belts. A projection assuming a permanently clean array is assuming a maintenance regime somebody has to actually perform.

For commercial systems, inverter replacement should be provisioned somewhere in the second decade. Modules outlive inverters, and a lifetime return that ignores that is incomplete.

A domestic consumer with net metering can be relatively relaxed about when generation happens. A commercial consumer cannot, because the gap between the retail tariff avoided by self-consuming and the credited value of an exported unit is where the return lives.

Two identical 50 kW plants on identical buildings can differ by years in payback purely because one operates through daylight hours and the other does not. This is why we size commercial systems from twelve months of consumption data with the load pattern examined, not from roof area.

Accelerated depreciation then improves the post-tax position for a profit-making entity — but that calculation belongs to your finance team, since it depends on your tax position rather than on the plant.