Economics of your electricity bill

Benefit in investing in your own electricity Vs investing the same amount in a fixed deposit

Let’s consider two persons A and B who are having Rs. 25,000/- monthly electricity bill. The all inclusive investment for solar electricity generation system that can wipe out this Rs. 25,000/- electricity bill is Rs. 2,200,000/- (Rs. 2.2 Million)

A invests Rs. 2.2 Million in a solar electricity generation system

B invests the same amount in a fixed deposit at a rate of 14% per annum

 

The future of A
Monthly Consumption		600
Monthly bill (Rs)		24998.85
New bill (Rs)		142.50
System capacity		5.00
Investment		2,150,000
Monthly Saving		24,856
Annual Increase in tariff		0.19
	Year	Monthly Saving	Annual saving	Accumulated Saving	Recover of investment
Standard Warranty Period	1	24856	298,276	298,276	-1,851,724
	2	29579	354,949	653,225	-1,496,775
	3	35199	422,389	1,075,614	-1,074,386
	4	41887	502,643	1,578,257	-571,743
	5	49845	598,145	2,176,402	26,402
	6	59316	711,793	2,888,194	738,194
	7	70586	847,033	3,735,227	1,585,227
	8	83997	1,007,969	4,743,197	2,593,197
	9	99957	1,199,484	5,942,680	3,792,680
	10	118949	1,427,385	7,370,065	5,220,065
	11	141549	1,698,589	9,068,654	6,918,654
	12	168443	2,021,320	11,089,975	8,939,975
Extendable Warranty Period	13	200448	2,405,371	13,495,346	11,345,346
	14	238533	2,862,392	16,357,738	14,207,738
	15	283854	3,406,246	19,763,984	17,613,984
	16	337786	4,053,433	23,817,418	21,667,418
	17	401965	4,823,586	28,641,003	26,491,003
	18	478339	5,740,067	34,381,070	32,231,070
	19	569223	6,830,679	41,211,749	39,061,749
	20	677376	8,128,509	49,340,258	47,190,258
	21	806077	9,672,925	59,013,183	56,863,183
	22	959232	11,510,781	70,523,964	68,373,964
	23	1141486	13,697,829	84,221,793	82,071,793
	24	1358368	16,300,417	100,522,210	98,372,210
	25	1616458	19,397,496	119,919,707	117,769,707

  

The calculation in above table is done as follows.

• The monthly consumption is 600kWh and that is a Rs. 24,998/- electricity bill 
•  After installing a 5kWp solar electricity generation system, the new bill is Rs. 142/- only.  There for he will start to save his entire electricity bill 
• The investment for the system is Rs. 2.150 Million. 
• The annual increment in electricity tariff is taken as 19%

According to the results we can see that A will recover his invested Rs. 2.150 Million from the saving of his electricity bill in just 5 years. That means after this point he start to get free electricity and also there are no risks for the equipment because they are still under warranty.

The inverters warranty period is 12 years. At the end of inverters warranty period A have saved Rs. 8.94 Million. If A buy the inverter with extended warranty of 20 years, then at the of inverters warranty period he will save Rs. 47 Million.  

 

At the end of the warranty period for solar panels, that means after 25 years later A have saved Rs. 117.77 Million. That is he invested Rs. 2.150 Million and saved Rs. 117.77 Million in 25 years. That is a gain of 55. At the end of 25 years, it will be equal to saving Rs. 392,566/- a month.

The advantage of this saving is you no need to pay any taxes to these Rs. 117.77 Million.

The Future of B

There you can see how B loses money. That is because even he gets interest for his fixed deposit, he have to spend an amount greater than that for electricity. So even he saves at the bank, he is spending greater than that at home. So the net saving is actually a lost.

There for after 12 years later B has lost Rs. 750,000/- and after 25 years later his loss is Rs. 12 Million.

If B wants to match the two investments, he must have a guaranteed interest rate of 19% per year for the next 25 years.

Therefore investing in your own electricity is beneficial than investing in fixed deposits.

Interest rate				14%
Investment (Rs)				2,150,000
Year	Investment	Interest	Accumulated Total saving in each year	The hole in saving, Electricity bill	Amount B lose in every year
1	2,150,000	301,000	2,451,000	298,276	2,724
2	2,451,000	343,140	2,794,140	354,949	-11,809
3	2,794,140	391,180	3,185,320	422,389	-31,209
4	3,185,320	445,945	3,631,264	502,643	-56,698
5	3,631,264	508,377	4,139,641	598,145	-89,768
6	4,139,641	579,550	4,719,191	711,793	-132,243
7	4,719,191	660,687	5,379,878	847,033	-186,346
8	5,379,878	753,183	6,133,061	1,007,969	-254,786
9	6,133,061	858,629	6,991,689	1,199,484	-340,855
10	6,991,689	978,837	7,970,526	1,427,385	-448,549
11	7,970,526	1,115,874	9,086,399	1,698,589	-582,715
12	9,086,399	1,272,096	10,358,495	2,021,320	-749,225
13	10,358,495	1,450,189	11,808,685	2,405,371	-955,182
14	11,808,685	1,653,216	13,461,901	2,862,392	-1,209,176
15	13,461,901	1,884,666	15,346,567	3,406,246	-1,521,580
16	15,346,567	2,148,519	17,495,086	4,053,433	-1,904,914
17	17,495,086	2,449,312	19,944,398	4,823,586	-2,374,273
18	19,944,398	2,792,216	22,736,614	5,740,067	-2,947,851
19	22,736,614	3,183,126	25,919,740	6,830,679	-3,647,554
20	25,919,740	3,628,764	29,548,503	8,128,509	-4,499,745
21	29,548,503	4,136,790	33,685,294	9,672,925	-5,536,135
22	33,685,294	4,715,941	38,401,235	11,510,781	-6,794,840
23	38,401,235	5,376,173	43,777,408	13,697,829	-8,321,657
24	43,777,408	6,128,837	49,906,245	16,300,417	-10,171,580
25	49,906,245	6,986,874	56,893,119	19,397,496	-12,410,622

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