Money, contracts and financing
Return on investment (payback)
Also known as: payback, payback period, amortisation.
Definition
Return on investment, or payback, is the time it takes for the accumulated saving on the bill to match what the solar system cost. From that point on, the energy the installation produces is net benefit for the rest of its service life.
The basic calculation divides the total investment by the estimated annual saving, but its reliability depends entirely on the assumptions. The variables that move it most are the real cost of the system, your consumption and your tariff, the proportion of energy you self-consume versus export, the radiation in your area and the system's performance ratio. Changing any of them shifts the result by years.
An honest analysis also incorporates what usually gets left out: the foreseeable inverter replacement within the horizon, some maintenance, the annual degradation of the panels and, in the opposite direction, the evolution of the electricity tariff. Ignoring the inverter cost while assuming rising tariffs is the combination that produces the too-good paybacks in some commercial proposals.
So a payback figure only means something if it comes with its assumptions stated. An installer promising a specific payback without having seen your bill or the details of your roof is not calculating: they are selling. The right question is not how many years it takes, but which numbers that figure comes from.
The essentials of Return on investment
- Payback ≈ total investment ÷ estimated annual saving.
- It depends on your tariff, your consumption, your self-consumption, radiation and performance ratio.
- A serious calculation includes the inverter replacement and degradation.
- Without seeing your bill, any promised period is an estimate with no basis.
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Frequently asked questions about Return on investment
How long does a solar system take to pay for itself in Colombia?
There is no single figure: it depends on the tariff you pay, on your consumption, on the percentage you self-consume, on the radiation in your area and on the real cost of the installation. Two neighbouring households with different consumption can have very different paybacks from the same system.
Which costs are usually forgotten when calculating the return?
The three usual ones are the inverter replacement within the analysis horizon, periodic maintenance and cleaning, and the annual degradation of the panels. An estimate that does not mention them is calculating a more favourable scenario than the real one.
Do the tax incentives shorten the payback?
They can do so significantly on business projects that access the Law 1715 benefits with prior UPME certification. On residential projects their effect is far more limited, so it is worth not building them into the calculation without confirming they apply in your case.
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