What are the benefits of installing a solar power system?

What are the benefits of installing a solar power system?

There are several reasons whether economic, environmental, or personal that would appeal to you as a reason for going solar:

Drastically “reduce” or even “eliminate” your electricity bills

One of the biggest reasons to go solar is that you can almost entirely eliminate your electricity bill. As an example, a monthly bill of Rs 3,000/- becomes an annual expense of Rs 36,000/-. Over 20 yrs, assuming a conservative 4% annual escalation in your grid power tariffs, the amount you would be paying your Utility Company is ~ Rs 10.75 lakhs!!. Installing a solar power system not only helps avoid these future costs but also more importantly locks your electricity costs today with the savings going up as electricity tariffs go up each year.

Let’s take an example. If the homeowner in the above case installed a 2kW solar hybrid system, then the electricity bill would go down by 52%, resulting in savings of ~ Rs 1,550/mth. The 2kW system would be sufficient to power most essential loads in the home such as lights, fans, TV. Kitchen appliances etc. and would also provide back-power to these appliances in case of a power outage. These monthly savings could be even higher with a 3kW solar hybrid system as this system would be able to power the entire home on solar, including even higher power appliances such as geyzers, micro-wave ovens etc. reducing your monthly electricity bill by almost 80%, or, providing you monthly savings of ~ Rs 2,300/- month. In case there are no daytime power cuts, then a net metered solar system (i.e. a solar powers system without storage) would be more cost-effective and a 3.4kW solar power system would provide savings of upto 90% in your electricity bill.

Check your savings with solar here.

Earn a great return on your investment

Investing in solar panels for your home also makes great financial sense & the returns provided by your solar power system, rival the returns provided by traditional asset classes such as stocks & real-estate while being more predictable and less risky than traditional investments.

Continuing with the above example, the 2kW solar hybrid system would cost approx. Rs 2.3 lakhs and provide you savings of ~ Rs 1,550 per month. Your savings during the 1styr, would be Rs 18,600/- resulting in an ROI of 8% for the 1st yr. The annual savings would also increase, conservatively put at 4% every year as that is the rate at which your grid power tariffs go up each year. Even assuming the energy produced by the solar panels goes down by 0.5% every yr, your ROI over the initial 5 yrs would be ~ 43% & over 25yrs would be a whopping 314%, an equivalent return of approx. 12.5% per yr. If you were to additionally factor in the economic benefit of having back-up power during a power outage then the return on investment would be even higher.

In summary, solar panels offer many superior characteristics that make them strong contenders for inclusion in your overall investment portfolio as they provide,

Consistent, long-term, less risky returns

Solar power systems produce free electricity for 25+ years as they require minimal maintenance & upgrade expenses during their lifetime. Over this period, you will generate returns in the form of savings, equal to what you would have otherwise paid your Utility company. It’s safe to say that the cost of electricity from your utility company will continue to rise, and this makes the returns from your solar power system low risk & consistent over its useful life. There aren’t many other investment options capable of producing consistent, relatively safe returns of above 10% or more over such a long period of time

Increasing returns over time

As the electricity rates from your Utility company increase, so, do the savings from the solar power system thus increasing the return on your solar investment. Historically, electricity rates have increased in India between 4% – 9% per yr and the returns from your solar system would increase at the same rate.

Tax-free returns

The returns from your solar system come in the form of savings, and not income. It is important to understand this key difference, as unlike income, savings are not taxed, and depending on your tax bracket, your solar power system can deliver 20 to 35% more cash in your pocket compared to a taxable mutual fund investment earning a comparable rate of return.

Move to a Dependable lifestyle

Electricity provided by your utility company can often be erratic due to unscheduled power cuts while the electricity costs can also increase unpredictably year on year (the costs have increased as much as 10% – 15% in certain states in India). Installing solar panels can make one of your biggest monthly expenses, your electricity costs, more stable & predictable. This can be especially beneficial for families that are on a fixed income, or, for a business that stands to gain from stable cash flows. Installing a solar power system with storage also frees you from discomfort caused due to unscheduled power cuts leading to a more comfortable, dependable lifestyle.

Contribute to the National goal of energy security & energy independence

By harnessing abundantly available sunlight, each one of us & make a small contribution towards helping India achieve energy security. Global energy markets are notoriously unstable and price fluctuations in energy/fuel imports have a serious impact on the Indian economy. As a nation, as we expand our capacity to generate solar electricity, we reduce our country’s dependence on imports while helping save valuable forex reserves. Rooftop solar, or, distributed solar is also a lot more cost efficient as energy is generated at the point of consumption and energy independence for each home would collectively translate into energy independence for the nation.

Protect the environment

Climate change & health issues due to pollution are two of the most serious problems facing us and going solar helps address both these issues. The electricity that solar panels produce is completely emissions free. In addition, when you use solar energy to meet your energy needs, you reduce an equivalent amount of demand for electricity from the Utility company. As a result, the utility plant emits less carbon when producing the power to meet customer demand. Depending on the fuel source used by the utility plant the carbon footprint reduction brought about by solar installations, when aggregated at scale could be quite significant.

On an average, a 4 member home that installs about 2kW solar, would help the carbon footprint reduce by 3 to 4 tons per yr. Over the lifetime of the system, the carbon footprint reduction is equivalent to the amount of carbon sequestered by a 2 acre forest over its lifetime.

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