How Long Will It Take to Recoup the Cost of a Solar Installation?

With more Nigerians going towards solar energy so as to escape from the obvious high cost of electricity bills and fueling of generators, a lot of people have been curious about How Long it will take for them to recover the total amount they spent on installing solar in their homes and Businesses.

The answer to this question obviously depends on a lot of factors. The size of the solar panels could positively or negatively have an effect on the recovery time.

Also your current location as well as how much electricity you make use of can also have its own effect. don’t worry in this blog post, We will try to break down everything for you.

What’s the Payback Period for Solar Energy:

The Payback period is used to discuss the time that it will take your Electricity bills to be equal to the initial amount you used to install the solar system.

Once this period is gone, it’s right to say your solar system is practically generating free electricity for you for the rest of its lifespan. When you consider the fact that most solar systems tend to last up to 25 years, it’s safe to say this is an absolute smart investment. although it’s going to take quite some time for you to recover the full cost.

Some Factors That could Affect the Payback Period:

The total amount of money you spent on the solar installation could affect the payback time. Now the total Installation cost most often than not will depend on the size of the solar panels, for example we have the 1kW, 3kW, 5kW etc, Each of these sizes has their prices, the bigger the price, the higher the Installation cost.

Another thing that plays a very significant role is the type of the solar panels which are mainly the monocrystalline and Polycrystalline, The quality of the components such as the inverter, mounting structure and the batteries also have significant effect.

The cost of Installation is also another deciding factor that shouldn’t be neglected, let’s say for example, purchasing a 5kW solar system in Nigeria could cost you between N1,500,000 to around N3,000,000, While if you decide to buy a smaller 3kW system, it’s going to cost you about N750,000 to around N1,500,000.

2. Monthly Electricity Savings

If you installed solar system, it automatically helps you to reduce or even eradicate your Electricity bills, The amount you are going to save as a result of this will depend on

a.The total amount of Electricity you are going to generate from the solar system. If you happen to generate all your Electricity from the solar system, then you are completely getting rid of electricity bills.

b.The cost of Electricity per kWh from your providers also has an effect as well as how much grid electricity you are going to replace.

For example if your Electricity bill used to be around N50,000 monthly before you installed solar, and your solar system happens to reduce this drastically to N5,000 monthly, what this means is that you are saving about N45,000 monthly.

3. Energy Consumption

If your property or business makes use of a lot of electricity, then you might be required to go for a larger solar system which means your payback period could increase significantly, However with higher usage, you’re sure of higher savings which will automatically help you to recover way faster.

4. Grid Power Availability

If you live in an area that often experiences a more frequent power outage, then you may have to depend on solar energy even more, which will naturally lead to a faster cost recovery. While if you stay in a location where there is a more stable power supply, the Savings might be lower and this will of course slightly extend the payback period for you.

5. Battery Storage

Those who install solar batteries tends to have a higher initial cost, However with these batteries, it’s easier for you to store excessive energy which you can then use during night time, this will also extent the payback period a bit slightly, but one thing is for sure, in the long run, you are going to save Even more.

6. Maintenance Costs

Like we’ve said countless times, solar systems need very minimal maintenance, but if you are cleaning your panels and also replacing the batteries, that is if they’re used, it might actually add a little recurring costs.

If you are making use of high quality lithium batteries, they’re sure to last within 8 to 15 years, while those making use of lead Acid batteries may need to replace them after just 3 to 5 years.

How to Calculate the Solar Payback Period in Nigeria

Here’s an Example on how you can Calculate your solar system payback period in Nigeria.

Let’s take for instance that you installed a 3kW solar system that costs you about N1,2 million and you were able to save around N45K every month on Electricity bills.

Your yearly Savings will be 45,000 x 12 which will give you N540,000 every year.

Your payback period is N1,200,000÷540,000 which will give you 2.2years.

What this simply means is that in just over 2 years, you are going to recover all your investment. That simply implies that for the next 20+ years, you are going to enjoy absolute free electricity.

How to Reduce the Payback Period and Save More

1. Choose the Right Solar System Size

Make sure you choose the right solar system size for your home or business. If you decide to buy a panel that’s oversized, your cost is definitely going to be on the high side which will lead to a longer payback period.

While if the system is too small, it might not generate enough savings. Also make use of appliances that are energy efficient, you can switch to energy saving bulbs, inverter AC and other appliances that can help reduce how much energy you consume.