About the NPV Calculator
Net Present Value (NPV) converts all a solar project's future cashflows into today's rupees using a discount rate, then subtracts the upfront investment. A positive NPV means the project creates value above the required return; a higher NPV means more value created.
Formula
NPV = Σ [Cₜ ÷ (1 + r)ᵗ] for t = 0 to n
- Cₜ
- Net cashflow in year t (₹): −capex in year 0, savings − O&M in years 1–25
- r
- Discount rate (WACC or required equity return, e.g. 0.12 for 12%)
- n
- Project horizon in years
How to calculate it
- 1Set the discount rate r equal to your required return (WACC for project finance, cost of equity for an equity-only investment).
- 2Project year-by-year net cashflows: annual generation × tariff (escalating) minus O&M, adjusted for degradation.
- 3Discount each cashflow by (1 + r)ᵗ and sum them.
- 4Subtract the initial net capex (after subsidy) from the sum. If the result > 0, the project is worth doing at your target return.
Worked example
A 10 kW rooftop system, net investment ₹4.5 L (after ₹78,000 subsidy). Annual savings start at ₹1.05 L (10 × 1,500 kWh × ₹7) and grow at 3.5%/year. At a 12% discount rate, NPV ≈ ₹4.1 L — meaning the system creates ₹4.1 L of value above the 12% required return over 25 years.
What you can calculate
- Discount rate
- Inflation model
- Cashflow NPV
- Break-even year
Frequently asked questions
What discount rate should I use for a solar NPV calculation in India?
For a homeowner using own funds: use 7–9% (comparable to a fixed deposit return). For a C&I business: use the company's WACC or post-tax cost of equity (typically 12–15%). For a project with debt financing: use the WACC blending debt and equity costs.
What does a negative NPV mean for a solar project?
A negative NPV means the project does not earn the required discount rate — not necessarily that it loses money. Lowering the discount rate assumption, factoring in the PM Surya Ghar subsidy, or negotiating a lower capex can turn a negative NPV positive.
How is NPV different from simple payback for solar?
Payback ignores returns after the break-even point and the time value of money. NPV captures the full 25-year value and adjusts for when each cashflow occurs. A 5-year payback project can have very different NPVs depending on how fast savings grow after payback — NPV tells the full story.
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