How long does it take for the solar system to return the investment?

Typically, the payback period for a residential photovoltaic system in Brazil is approximately four years. This means that after four years, with the energy savings provided by the solar system, you will have recovered the entire amount invested.

Follow the article below with infographics, case studies and examples of how ROI works when it comes to investing in solar energy.

Return on investment: case studies

Always remember: what should be evaluated when purchasing a photovoltaic system is not the total value of the investment, but the benefit it provides. The main number to be analyzed is the return on investment time, which is around 4 to 5 years, depending on where it is installed. After the return on investment time, you should analyze the return on investment itself. In other words, you should evaluate how much money you will earn with the photovoltaic system over the years.

Like any investment, the solar energy system will present a profitability throughout its useful life. This investment analysis can be performed for you by company hired for the project and the supply of the photovoltaic system.

Normally, investment analysis is not required in residential systems, since the low payback time and the advantages of photovoltaic systems are already well known in the market.

See also: How can I have solar energy in my apartment?

Residential photovoltaic systems are currently viable and profitable anywhere in Brazil and are highlighted by finance experts as an investment with higher profitability than many financial products. With electricity rates rising frequently, taking money out of savings or other investments and purchasing a photovoltaic system is a very safe and profitable business.

Want to know more about solar energy? Check out the courses and training do Canal Solar!

Solar energy system purchased with equity

Figure 2 below shows the accumulated cash flow from an investment in a 5 kW solar system at a cost of R$25.000. The study was carried out in a location where the current cost of electricity is R$0,80/kWh, considering inflation of 5% per year.

In practice, we know that electricity costs much more than this in many places in Brazil and tariff inflation is usually above 5%, which makes purchasing a photovoltaic system even more profitable. In this case, we are considering that the buyer used his own capital to purchase the photovoltaic system.

In the graph below, in the first three years the cash flow is negative (red bars), indicating that the system is paying for itself. From the fourth year onwards the accumulated profit is positive (green bars), which means that the system has already paid for itself – that is, the owner has already recovered all the investment made.

From the fifth year onwards, the green bars increase, indicating a profit of around R$225 thousand in the 25th year. Put simply, the return on investment in the photovoltaic system will be more than 900% at the end of 25 years. Having a photovoltaic system is an excellent deal.

Solar energy system purchased with financing

Now let's analyze what happens if the same photovoltaic solar energy system is purchased through financing. In other words, instead of using your own capital, you fully finance the amount of R$25 at a rate of 5% per year, with a payment period of 5 years. The result is shown in Figure 2.

In Figure 3 we observe that the cash flow is always positive. This means that it is not necessary to pay any amount to purchase the photovoltaic system. The financing installments are paid with electricity savings.

The advantage of financing a photovoltaic system is that no equity capital needs to be used. In other words, you can purchase a solar system without spending anything, just by borrowing the money from the bank. The disadvantage is that profitability is slightly lower, as you need to pay interest on the financing during the first five years.

Even financed, the photovoltaic system continues to be an excellent business, as the owner is free from the electricity bill and still achieves a profitability of almost 880% under the conditions used in our simulation. In addition to saving on the electricity bill, the owner also earns money without committing his own capital. 

Conclusion

Best investment, impossible. Photovoltaic systems return the value invested in a short time and also provide a profit for the owner. The numbers shown in Figures 2 and 3 reflect the real conditions encountered by anyone who today wants to purchase a photovoltaic system in Brazil, whether with their own capital or financed. Furthermore, for those interested in better understanding this market and its advantages, participation in solar energy events It can be an excellent way to deepen knowledge and maximize the benefits of this technology.

It is no coincidence that more than 360 thousand consumers have already installed photovoltaic systems in Brazil, spread across more than 5,1 thousand municipalities from North to South, totaling more than 4,32 GW (billion watts) of power – data from December/2020 obtained from the website ANEEL (National Electric Energy Agency).

To delve deeper into sales techniques and strategies for the photovoltaic solar energy market, including financing, we recommend the Photovoltaic Solar Energy Commercial and Sales course.