Blog Post

ROI Calculation for Commercial Solar: Step-by-Step for Indian Enterprises

Author: Silinfra

August 25, 2025 | 10 Min Read

Learn the proven process to estimate ROI on commercial solar in India, including capital costs, operational savings, depreciation benefits, and available loan options. These strategies help enterprises unlock maximum returns and improve business competitiveness.

With India’s rapidly rising energy costs and government-backed incentives, commercial solar is no longer a luxury—it’s a profitable business investment. Calculating the actual Return on Investment (ROI) helps decision-makers assess true benefits, plan finance, and present a solid business case to management.

Step 1: Assess Capital Costs

System Cost Breakdown
Typical industrial solar system costs in 2025 range from ₹35,000–₹40,000 per kW (CAPEX excludes land, large civil works).
What’s included:
Panels, inverter, BOS (Balance of System), EPC contractor fees, installation, and GST.
Tip: Always request an all-inclusive quote tailored for your roof/site.

Step 2: Estimate Operational Savings

Annual Energy Generation
Formula:
$Annual Generation (kWh) = Installed kW \times CUF \times 365 \times 24$
CUF (Capacity Utilization Factor) for good sites in India: 16–20%.
Savings Calculation
$Annual Savings (₹) = Annual Generation \times Grid Tariff (₹/kWh)$
Typical Commercial Scenario:
A 100 kW system (~₹36 lakh) can generate 1.6 lakh–1.8 lakh kWh annually, saving up to ₹14–₹18 lakh per year at ₹8–₹10/kWh tariff.

Step 3: Account for Operational Expenses

Annual O&M (Operation & Maintenance) costs: Typically ~₹500–₹800/kW/year.
Inverter replacements: Plan for 1 change every 10–12 years.

Step 4: Calculate and Interpret ROI

Basic ROI Formula:
Or, Annualized ROI:
$Annualized ROI (%) = [(Annual Savings - Annual O&M)/Total Investment] x 100$
Typical ROI for Commercial Installations:
15–25+% per annum, with payback in 3–5 years.

Example Calculation (100 kW)

Item	Value
Initial Cost	₹36,00,000
Annual Generation	1,70,000 kWh
Tariff	₹9/kWh
Annual Savings	₹15,30,000
Annual O&M	₹60,000
Payback Period	~2.5 years
25-Year ROI	280%+

Step 5: Factor in Depreciation—Accelerated Depreciation Benefit

Current Rule:
Solar plants are eligible for 40% accelerated depreciation (WDV basis) in the first year.
Impact:
Significantly reduces taxable income, improving cash flow and shortening payback periods.
Tax Savings Calculation:

This can recover up to 60% of project costs in tax savings over 2–3 years for profitable enterprises.
Tip:
Consult a tax advisor and claim all eligible AD under IT Section 32 for solar.

Step 6: Include Subsidies and Incentives (if any)

Central/State Incentives:
Most current central subsidies are for rooftop plants up to 10 kW; larger commercial plants mainly benefit from depreciation and GST input credits.
Net Metering:
Savings are maximized if net metering is available for your category.

Step 7: Solar Project Financing—Loan Options

Types:
- Term loans from PSU/Private Banks (e.g., SBI Surya Shakti)
- NBFCs and green lenders offer solar-specific loans up to ₹3 crore, 3–8 year tenure.
Loan Process:
- Minimal collateral, simple documentation, and competitive rates (8.5–12% p.a.).
- EMIs can be structured to match savings; cash-neutral from day one for most enterprises.
Tip:
Use savings to pay EMIs, improving cash flow.

Proven Tips for Accurate ROI Calculation

Use actual site data—get a shadow analysis done to estimate CUF accurately.
Update electricity tariffs annually for future projections; use a modest escalation (e.g., 3–5%).
Account for inverter change and periodic O&M in 25-year models.
Factor in loan interest and principal when modeling actual cash flows.

Calculating ROI for commercial solar is straightforward when you include all costs, savings, and incentives. With 15–25%+ annual returns, government-backed accelerated depreciation, and tailored financing now easily available, Indian enterprises can confidently invest, cut costs, and ensure a sustainable, profitable future.