For a factory or commercial building, a rooftop solar plant is not a green gesture — it is a capital project that competes with every other use of your money, and it should be evaluated like one. The good news is that the numbers are usually compelling: with high daytime consumption, commercial tariffs, accelerated depreciation and a 25-year asset life, industrial solar in India routinely delivers payback in 3–5 years and an IRR north of 20%. This guide shows you exactly how to build that calculation, step by step, with a worked example you can adapt to your own plant.
The five numbers that drive every commercial ROI
Before any spreadsheet, gather these inputs:
- System size (kW) — set by your roof area and daytime load.
- Installed cost (₹/kW) — the turnkey CAPEX, including modules, inverter, structure, BoS and commissioning.
- Annual generation (units/kW/year) — about 1,400–1,500 units per kW per year in Gujarat.
- Effective tariff (₹/unit) — what you currently pay the DISCOM per unit, including energy charges and the demand-charge benefit (see below).
- Annual O&M cost — typically a small percentage of CAPEX for cleaning, monitoring and servicing.
Get these right and the rest is arithmetic.
Step 1 — Annual savings
The headline saving is simply the energy you no longer buy from the grid:
Annual savings = Annual generation × Effective tariff
A 100 kW plant generating 1,450 units/kW produces 145,000 units a year. At an effective commercial tariff of ₹9/unit, that is **₹13,05,000 saved per year** in energy charges alone — before counting demand-charge and depreciation benefits.
Step 2 — Simple payback
The most intuitive metric:
Simple payback (years) = Net system cost ÷ Annual savings
It ignores the time value of money and tax effects, but it is a quick sanity check. For most well-sited commercial rooftops, simple payback lands in the 3–5 year band.
Step 3 — Add accelerated depreciation
This is the lever many businesses overlook. Under Indian income-tax rules, commercial solar assets qualify for accelerated depreciation (AD) — historically up to 40% in the first year — which lets a profitable company write down a large slice of the asset cost against taxable income early. For a firm in the 25–30% tax bracket, AD can effectively return a meaningful fraction of the CAPEX as tax savings in the first couple of years, sharply improving the real payback. The exact AD rate and rules change with the Finance Act, so confirm the current depreciation provisions with your CA before modelling — but factor it in, because it materially shifts the IRR.
Step 4 — Account for demand charges
Commercial and industrial electricity bills have two parts: energy charges (₹/unit consumed) and demand charges (₹/kVA of your sanctioned/maximum demand). Solar directly cuts energy charges. Its effect on demand charges is subtler — because the grid still must be available when the sun is not — but a well-designed system that shaves peak daytime draw can reduce recorded maximum demand. For sites with sharp daytime peaks, pairing solar with storage to flatten that peak unlocks further savings; we cover this in commercial battery storage and peak shaving. When you calculate your effective tariff, use your real blended rate, not just the slab energy charge.
Step 5 — IRR over the asset life
Internal Rate of Return treats the plant as an investment with an upfront outflow and 25 years of inflows (savings net of O&M), and finds the discount rate at which it breaks even. Because a solar plant is paid back in a few years and then generates near-free power for two more decades, the IRR is typically well above 20% — comfortably ahead of most fixed-income or expansion alternatives. Model degradation of ~0.5%/year and one inverter replacement around year 12 for a realistic figure. Our deeper treatment of open access solar in Gujarat covers the IRR case for larger off-site plants too.
A fully worked example: 100 kW industrial rooftop
Here is the calculation end to end for a representative Surat factory rooftop:
| Line item | Value |
|---|---|
| System size | 100 kW |
| Installed CAPEX (indicative) | ₹45,00,000 |
| Annual generation (1,450 units/kW) | 1,45,000 units |
| Effective commercial tariff | ₹9/unit |
| Year-1 energy savings | ₹13,05,000 |
| Annual O&M (~1.2% of CAPEX) | ~₹54,000 |
| Net annual benefit (energy − O&M) | ~₹12,51,000 |
| Simple payback (before tax benefit) | ~3.6 years |
| Accelerated depreciation benefit (early years) | Reduces effective payback further |
| 25-year IRR (indicative) | ~20–25% |
| Lifetime generation (with degradation) | ~33–34 million units |
Even on conservative assumptions and ignoring the depreciation benefit, this plant pays for itself in well under four years and then runs for two more decades. Add AD and the real after-tax return is stronger still. Run the equivalent for your own site with our solar savings calculator.
CAPEX vs OPEX — which model fits your balance sheet?
There are two principal ways to finance commercial solar, and the right one depends on your capital position and appetite for ownership:
| CAPEX (you own) | OPEX / PPA (developer owns) | |
|---|---|---|
| Upfront cost | Full system cost | Zero |
| Who owns the plant | You | The developer |
| Savings captured | 100% of generation value | You buy units at a discounted tariff |
| Tax benefits (depreciation) | You claim them | Developer claims them |
| Best IRR | Yes, if you have the capital | Lower, but no capital outlay |
| Ideal for | Profitable firms wanting maximum return | Firms preserving capital / wanting zero risk |
In CAPEX, you own the plant, claim depreciation and capture every rupee of savings — the best ROI if you have the capital. In OPEX/PPA, a developer funds, owns and maintains the plant and you simply buy the solar units at a discounted tariff, with zero upfront cost and immediate savings from day one. We model both for every commercial enquiry. For a fuller comparison, see CAPEX vs OPEX solar.
Frequently asked questions
What payback should I realistically expect?
For most commercial and industrial rooftops in Gujarat, 3–5 years simple payback, often closer to 3–4 once accelerated depreciation is included. The exact figure depends on your tariff, roof and consumption profile.
How does accelerated depreciation actually help?
It lets a profitable company write down a large part of the asset cost against taxable income in the early years, reducing tax payable and effectively returning a portion of the CAPEX quickly. Confirm the current rate with your CA, as it is set by the Finance Act.
Will solar reduce my demand charges?
It reliably cuts energy charges; its effect on demand charges depends on your load profile and whether you add storage to shave peaks. Use your real blended tariff when modelling, and consider peak shaving if demand charges dominate your bill.
Is OPEX really zero-cost?
There is no upfront capital, but you pay for the solar units at the agreed PPA tariff for the contract term. It trades a lower headline return for zero capital risk — ideal when preserving cash matters more than maximising IRR.
What lowers a commercial plant's ROI?
Undersizing relative to daytime load, heavy shading, poor-quality components, weak O&M, and a low effective tariff. A correctly engineered, well-maintained system on a genuine ALMM/quality bill of materials protects the return — which is the case for working with an experienced EPC.
Build the model for your site
The ROI on commercial solar is strong, but every plant is different — your tariff, roof, load curve and tax position all move the answer. We build a tailored ROI, payback and IRR model for every industrial and commercial enquiry, covering both CAPEX and OPEX, and back it with 10+ years, ISO 9001/14001/45001 certification and 5 MW+ of installed industrial capacity across projects like Ravi Textile (600 kW) and Rudrax Fabrics (175 kW). See our completed projects, explore our Solar EPC service, then request a tailored ROI model or start with the calculator. SilInfra Solar — Your Power Partner.