Ahmedonics

Energy

Solar payback calculator (net metering)

Build the year-by-year cash flow of a net-metered solar system from its size, cost, specific yield, self-used share, import tariff and export credit, with degradation, tariff escalation and an O&M allowance, and read off the simple and discounted payback, NPV, net benefit and LCOE.

System, tariff and assumptions
The DC rating of the array: the sum of the module wattages.
The quotation total including the net-metering work (meter, application, inverter approval). Prices move; enter yours.
PVGIS gives roughly 1 350–1 500 for Lahore and Islamabad, 1 500–1 600 for Karachi and 1 650–1 750 for Quetta, for a well-oriented, unshaded array after system losses.
A house with daytime air conditioning 50–70 %; a house empty all day 25–35 %; an office or factory on working days 70–90 %.
Your all-in cost per unit from the bill: the energy rate for your slab plus the surcharges and taxes that scale with units.
What your DISCO credits exported units at under the current net-metering rules. It has changed and may change again.
Module warranties allow about 0.4–0.55 % a year; field studies find 0.3–0.8 %.
Applied to both the import tariff and the export credit.
Cleaning, minor repairs and an inverter replacement fund.
What the money would earn elsewhere, or the interest rate on a loan.
Module performance warranties run 25 to 30 years.

Payback and cash flow

Enter your values and press Calculate.

What the calculator does

A net-metered solar system earns in two ways. The units it generates while the house or office is drawing power replace units that would have been bought from the DISCO at the import tariff; the units it sends out through the bidirectional meter earn a credit at the export rate, which is lower. The calculator builds a year-by-year cash flow from those two streams: generation from the array size and the site's specific yield, falling by the degradation each year; the tariff and the export credit rising by the escalation; and an allowance for cleaning and an inverter fund. From that it reports the simple payback, the discounted payback at your discount rate, the net present value, the net benefit over the horizon, the average value of a generated unit in the first year and the levelised cost of the energy, and it tabulates the cash flow so you can see where the money comes from.

It is the arithmetic behind the "pays for itself in three years" line on a solar quotation, with the inputs the quotation usually leaves out: how much of the generation you actually use on site, what the exported units are really worth, and what it costs to keep the system running. Size the array first with the solar system sizing calculator; check its orientation with the tilt and orientation calculator.

Formula

For each year i = 1 … N:
Generationi = kWp × yield × (1 − d)i−1 (kWh)
Tariffi = tariff × (1 + e)i−1 Exporti = export × (1 + e)i−1
Savingi = Generationi × s × Tariffi + Generationi × (1 − s) × Exporti − cost × m
Cumulativei = Saving1 + … + Savingi

Simple payback = the year in which Cumulative ≥ cost, interpolated within that year
Discounted payback = the same, with each Savingi ÷ (1 + r)i
NPV = Σ Savingi ÷ (1 + r)i − cost Net benefit = Σ Savingi − cost
LCOE = (cost + N × cost × m) ÷ Σ Generationi (undiscounted)

where d is the annual degradation, e the tariff escalation (applied to both the import tariff and the export credit, since the credit has historically been tied to a purchase price that moves with the tariff), s the share of generation used on site, m the operation and maintenance cost as a share of the installed cost, r the discount rate and N the horizon. Each year's saving is taken as a lump at the end of the year, which slightly understates the discounted figures against a monthly bill.

Worked example

A 10 kWp rooftop system on a house in Lahore quoted at PKR 1 800 000 installed, with a specific yield of 1 450 kWh per kWp per year, half of the generation used on site, an import tariff of PKR 45 per unit and an export credit of PKR 27, 0.5 % degradation, 5 % tariff escalation, 1 % of the cost a year for O&M, a 12 % discount rate and a 25-year horizon.

  1. Year 1 generation = 10 × 1 450 = 14 500 kWh. Self-used: 7 250 kWh × 45 = PKR 326 250. Exported: 7 250 kWh × 27 = PKR 195 750. O&M: 1 % × 1 800 000 = PKR 18 000. Net saving = 326 250 + 195 750 − 18 000 = PKR 504 000. The average value of a generated unit is 522 000 ÷ 14 500 = PKR 36.00, between the two rates.
  2. Year 2: generation 14 500 × 0.995 = 14 428 kWh; the tariff is 47.25 and the credit 28.35; net saving PKR 527 360; cumulative PKR 1 031 360.
  3. Year 3: 14 355 kWh, net saving PKR 551 764, cumulative PKR 1 583 124. Year 4: 14 284 kWh, net saving PKR 577 261, cumulative PKR 2 160 385, which passes the cost.
  4. Simple payback = 3 + (1 800 000 − 1 583 124) ÷ 577 261 = 3 + 0.38 = 3.4 years.
  5. Discounted at 12 %, year 1 is worth 504 000 ÷ 1.12 = 450 000, year 2 is 420 408, year 3 is 392 731, year 4 is 366 862 (cumulative 1 630 001) and year 5 is 342 670, so the discounted payback = 4 + (1 800 000 − 1 630 001) ÷ 342 670 = 4.5 years.
  6. Over 25 years the array generates 341 561 kWh and the savings sum to PKR 22 733 926, a net benefit of PKR 20 933 926 after the cost; the NPV at 12 % is PKR 3 776 647.
  7. LCOE = (1 800 000 + 25 × 18 000) ÷ 341 561 = 2 250 000 ÷ 341 561 = PKR 6.59 per kWh, against an import tariff of 45.

Change the self-used share to 30 % and the year-1 saving falls to PKR 451 800 and the payback stretches to 3.7 years; at 70 % the saving is PKR 556 200 and the payback 3.1 years. That one input, which the quotation never states, moves the answer more than any other.

The example's cash flow, first five years

YearGeneration (kWh)Tariff / credit (PKR per kWh)Net saving (PKR)Cumulative (PKR)
114 50045.00 / 27.00504 000504 000
214 42847.25 / 28.35527 3601 031 360
314 35549.61 / 29.77551 7641 583 124
414 28452.09 / 31.26577 2612 160 385
514 21254.70 / 32.82603 8992 764 284

Net saving is after PKR 18 000 a year of O&M. The cumulative passes the PKR 1 800 000 cost during year 4. The saving rises every year because a 5 % tariff escalation outweighs a 0.5 % degradation.

Assumptions and limitations

  • Net-metering rules are the DISCO's and NEPRA's, and they change. The export credit, whether settlement is monthly or quarterly, how net exports are carried forward or paid out, and the fixed charges on the bill are not modelled beyond a single export rate per unit. Enter the credit that applies to you today and rerun the calculation when the rules move.
  • The self-consumption share is the most important and the least known input. It depends on when the load runs, not how big it is. A logger on the meter for a week, or the hourly data from a smart inverter, is the only reliable source; the hints are ranges.
  • No financing cost. The cash flow assumes the system is paid for in full at year 0. With a loan, compare each year's saving with the instalment instead; the guide shows how.
  • O&M does not inflate and includes the inverter only if you set it so. A string inverter is usually replaced once in 25 years, at year 10–12. At 1 % of cost a year the fund for this system is about PKR 18 000 a year, roughly an inverter over 12 years; if your quotation's inverter costs more than that, raise the percentage.
  • Yield is the whole-year, after-losses figure. Shading, soiling in the dry months, grid outages (a grid-tied inverter stops when the grid is off) and inverter clipping all reduce it below the PVGIS number. Take the loss off the yield before entering it.
  • Tax and depreciation are not included. A business can usually depreciate the plant and may recover sales tax; that improves the return and belongs in the accountant's version of this sheet.
  • Savings are annual lumps. The bill is monthly and the seasons differ, so the true discounted figures are slightly better than shown.

Frequently asked questions

Why is my payback longer than the seller said?

Three usual reasons. The seller assumed every unit is worth the import tariff, when the units you export are worth the credit, which is lower. The seller assumed a higher self-use share than a house that is empty during the day can manage. And the seller ignored degradation, O&M and the units lost during grid outages. Put the real numbers into the calculator and the honest payback appears; it is still usually a good investment, only not the one in the brochure.

Does exporting still pay?

At an export credit of 27 against an import tariff of 45, an exported unit is worth 60 % of a self-used one. It still pays, but the array size that maximises the return is the one that covers the daytime load first; every kWp beyond that earns only the credit and pays back more slowly. If the credit falls further, oversizing for export stops making sense and a battery to shift the surplus into the evening starts to.

What yield should I use?

PVGIS with the site's coordinates, the real tilt and azimuth and a system loss of about 14 % gives an annual kWh per kWp that includes the local weather. The tilt and orientation calculator shows how much a roof that faces the wrong way gives up against that optimum; take the loss off the PVGIS figure if PVGIS was run for the optimum orientation.

How does load-shedding affect the return?

A grid-tied inverter must shut down when the grid goes off (anti-islanding), so every hour of daytime outage is lost generation. Two hours of daytime shedding a day is roughly a fifth of the generating hours. Either take that off the yield or fit a hybrid inverter with a battery, which keeps the house running and the panels working through the outage, at a higher installed cost; the grid-tied, hybrid or off-grid guide compares the options.

What is the difference between LCOE and payback?

Payback answers "when do I get my money back"; LCOE answers "what does each unit cost me over the life of the plant". LCOE is the total cost, here the installation plus 25 years of O&M, divided by the total generation, and it is what to compare with the tariff: PKR 6.59 against 45 in the example. Two systems can have the same LCOE and different paybacks if one exports more; payback depends on the tariff structure, LCOE only on the plant.

References

  • European Commission Joint Research Centre, PVGIS (Photovoltaic Geographical Information System) — specific yield for any site, orientation and system loss
  • NEPRA, Alternative & Renewable Energy Distributed Generation and Net Metering Regulations, 2015 (as amended) — the framework for net metering in Pakistan; the export credit and settlement terms in force govern
  • IEC 61724-1:2021, Photovoltaic system performance — Part 1: Monitoring — definitions of specific yield and performance ratio
  • NREL, Best Practices for Operation and Maintenance of Photovoltaic and Energy Storage Systems, 3rd edition, 2018 — O&M scope and cost ranges
  • IEA PVPS Task 13, Assessment of Performance Loss Rate of PV Power Systems, 2021 — measured degradation and performance loss rates
  • Jordan, D. C. and Kurtz, S. R., "Photovoltaic Degradation Rates — An Analytical Review", Progress in Photovoltaics 21(1), 2013 — median degradation of about 0.5 % a year for crystalline silicon

Last reviewed 2026-09-20.