In the previous article, What is the Payback period and the Financial feasibility of the solar roof in India?, where we calculated the payback period and the Net Present Value (NPV) of the solar roof, I found that the cumulative annual growth rate (CAGR) from my investment in the solar roof is much better than my savings bank account return.
(1) Return from solar roof
Please go through the previous article for detail understanding, you can anyhow get the basic idea by reading this article directly. Let us see how:
I found out that my investment of Rs. 91,000 in the solar roof will give me:
Return from the bank
The RBI’s move to deregulate the interest on savings bank account has made a positive impact on the savings bank account holders, now banks are offering higher interest rates to attract the customers. Due de-regularization of the interest rates, some banks are offering higher interest rates like Kotak bank offers 5.5% of return on savings account, if the deposited amount is less than 1 lakh. In our case it is Rs. 91,000. If I put the same amount of Rs. 91,000 in my savings bank account with 5.5% annual return for 25 years, then the total value will be Rs.3, 16,512. An average yearly income of Rs. 3, 16,512/25 years = Rs.12, 660
Who is the winner?
The solar roof is giving 0.7% or Rs. (3, 61,564 – 3, 16,512) / 25 years = Rs. 1, 802 more every year than my savings account & Net- Metering provides a cutting edge if you are living in any of the following states of the country:
A tabular comparison:
*Assuming that the savings bank rate of 5.5% will remain for 25 years
*The interest income from the saving account will be taxable
My savings or income from the solar roof is tax free while the interest income from the saving account is taxable.
(One can avail accelerated depreciation up to the extent of 80% on the initial investment on solar roof if installed for the commercial purposes.)
By looking at the advancement in the solar technology and with the government support, it is expected that in a year or two, the return from the solar roof may surpass the return from the fixed deposit or the Recurring deposits offered by the banks.