Solar investment cost and how to calculate payback

• Main equipment: modules, inverters and mounting structure — the largest share of contract value.
• Electrical and balance of system: DC/AC cabling, switchboards, protection devices, monitoring, lightning protection and earthing.
• Construction and labour: rooftop installation, safety measures, material handling, testing and commissioning.
• Soft costs: engineering, simulation, permitting, connection agreement, insurance and project management.
• Life-cycle costs: O&M, module cleaning, mid-life inverter replacement and annual insurance.

• System size: larger projects achieve a lower cost per kWp than small systems.
• Roof type and construction complexity: metal sheet, concrete, or roofs needing strengthening or replacement first.
• Equipment configuration: module series, inverter type (string, central, hybrid) and whether storage is included.
• Connection requirements and upgrades to the existing electrical system, plus cable distance to the connection board.
• Equipment price movements, exchange rates and logistics costs at the time of procurement.

Because of these factors, market reference figures only give direction; an accurate budget must come from a survey and design of your specific site.

Simple payback equals total investment divided by annual cash savings, where savings equal self-consumed generation times the applicable grid tariff, plus surplus export revenue if any, minus O&M costs.

Levelised cost of electricity divides the present value of all life-cycle costs by the present value of total generation. LCOE lets you compare self-investment directly against an ESCO tariff and against buying from the grid.

• Required inputs: simulated yield from local irradiation, self-consumption ratio, degradation, O&M cost and discount rate.
• Run several scenarios: reduced load, flat retail tariffs, and yield 5–10% below simulation.
• Compare all three routes: self-investment, ESCO, and renewable purchase through DPPA where green volume needs are large.

• Using theoretical regional irradiation instead of a simulation of the actual layout and shading.
• Assuming all generation is self-consumed while weekend and holiday load drops sharply.
• Ignoring O&M, insurance and mid-life inverter replacement.
• Assuming steady annual retail tariff increases to improve the payback figure.