How to calculate solar ROI in Pakistan

Payback and ROI are not the same thing

Almost every solar conversation in Lahore stops at payback. Two and a half years, three years, done. That number is useful for deciding whether to buy, and useless for comparing solar against any other place the same money could go.

Return on investment measures the whole life of the asset. It asks how many rupees come back for every rupee spent across twenty years, after subtracting the inverter that will need replacing, the battery that will need replacing, the cleaning contract, and the slow decline in panel output. That is a harder number to produce and a far more honest one.

The formula, written out

ROI over a chosen period equals total net benefit divided by total invested cost, expressed as a percentage.

Total net benefit is cumulative electricity savings across the period, minus every cost incurred after commissioning. Total invested cost is the turnkey installed price paid at the start.

The trap is that four of the five inputs are estimates, and small changes in them swing the answer wildly. Getting them right, or at least conservatively wrong, is the actual work.

Input one: annual generation

In Lahore a properly oriented array delivers roughly 3.6 to 4.2 units per day per kW of DC capacity averaged across a full year. Multiply installed kW by 1,400 for a reasonable annual unit figure. A 5.85kW array on ten 585W panels gives about 8,200 units a year.

Reduce that if the roof faces east or west, if a neighbour's stair block throws afternoon shade, or if the array sits flat on a mattress of dust between cleanings. The monsoon output and winter output pages break the seasons down.

Input two: the value of each unit

This is where most spreadsheets go wrong. A unit consumed inside the house saves the full LESCO retail rate, which sits between PKR 48 and PKR 65 depending on slab, plus the taxes and adjustments that ride on top. A unit exported to the grid earns a much smaller buyback under current net billing arrangements.

So the calculation needs two rates and a split. Without a battery, expect 65 to 75 percent self consumption on a typical Lahore household. With a properly sized battery, 90 percent and above. The net metering changes page explains why that split now matters far more than it did three years ago.

Input three: degradation

Tier-1 monocrystalline panels lose about 2 percent in the first year and roughly 0.5 percent annually after that. Twenty year output sits near 88 to 90 percent of day one. This is small enough that people ignore it for payback and large enough to matter across two decades.

Input four: replacements

Nothing on a roof lasts forever except, more or less, the panels themselves. Realistic replacement assumptions for Lahore:

• Hybrid inverter: expect a replacement somewhere between year 10 and year 14. Budget at today's prices, PKR 165,000 for a 5kW unit or PKR 295,000 for a 10kW.
• Lithium battery: year 8 to year 12 with daily cycling. A 5kWh pack costs PKR 285,000 today and will almost certainly cost less by then.
• Tubular battery: year 4 to year 5, at PKR 48,000 to 52,000 per 200Ah unit. A four battery bank replaced four times over twenty years is a large number that rarely appears in sales projections. Compare in lithium versus tubular.
• Structure and DC cabling: should last the full period if galvanised properly and if the DC run is UV rated. Cheap cable cracks in Lahore sun within five years.

Input five: running cost

Budget around PKR 20,000 a year for cleaning and small maintenance. Four cleanings a year is right for most Lahore roofs, and closer to six for houses near Ravi Road, Band Road or anywhere downwind of construction. Cleaning costs covers the going rate.

A full twenty year model, worked

Take the most common Lahore build: a 5kW hybrid with ten 585W panels and a 5kWh lithium battery, installed turnkey at PKR 781,000. The household is a ten marla home with two ACs consuming around 900 units a month. First year saving comes to PKR 324,000, calculated from a residual LESCO bill of about PKR 6,000 a month against a previous average near PKR 33,000.

Assumptions used: 0.5 percent annual degradation, flat electricity tariffs, PKR 20,000 annual maintenance, battery replacement in year 8 at PKR 200,000 and again in year 16 at PKR 170,000, inverter replacement in year 12 at PKR 165,000.

Year	Annual saving	Cost that year	Cumulative net position
0	-	PKR 781,000 install	PKR -781,000
1	PKR 324,000	PKR 20,000	PKR -477,000
3	PKR 320,768	PKR 20,000	PKR +126,000
5	PKR 317,568	PKR 20,000	PKR +723,000
8	PKR 312,828	PKR 220,000 battery	PKR +1,406,000
10	PKR 309,708	PKR 20,000	PKR +1,987,000
12	PKR 306,618	PKR 185,000 inverter	PKR +2,397,000
16	PKR 300,532	PKR 190,000 battery	PKR +3,358,000
20	PKR 294,566	PKR 20,000	PKR +4,465,000

Gross savings across twenty years come to roughly PKR 6,181,000. Total spending, including the original install, the two battery replacements, one inverter and two decades of maintenance, comes to about PKR 1,716,000.

Net benefit PKR 4,465,000 on an invested cost of PKR 781,000 gives an ROI of about 571 percent over twenty years, or roughly 29 percent a year in simple terms.

What happens when the assumptions move

A single scenario is a story. A range is an analysis. Here is how the twenty year net position shifts when one input changes at a time.

Scenario change	20 year net	vs base
Base case above	PKR 4,465,000	-
Tariffs rise 5 percent a year	PKR 8,830,000	Much better
Tariffs fall 20 percent and stay there	PKR 3,229,000	Still positive
Tubular batteries instead of lithium	PKR 3,690,000	Worse, four replacements
Array shaded 20 percent of the day	PKR 3,229,000	Worse
Never cleaned, 18 percent soiling loss	PKR 3,378,000	Worse than paying for cleaning

The pattern is what to take away. Solar in Lahore stays clearly positive across a wide band of unfavourable assumptions, and the two things a homeowner directly controls, shading and cleaning, cost more than most people expect when neglected.

Should tariff escalation be in the model

Electricity prices in Pakistan have moved a long way upward since 2021. It is tempting to build that into a projection and produce a spectacular number. Resist it.

A calculation that only works if tariffs keep climbing is a bet on policy, not an investment case. Model flat tariffs as the base, then show escalation as upside. If the flat case still returns well, the decision is sound regardless of what NEPRA does next.

The honest weaknesses of any solar ROI number

Three things are genuinely unknowable and no installer should pretend otherwise.

1. Future buyback rates. The regulatory treatment of exported units has already changed once and can change again. A system built around heavy export carries more regulatory risk than one built around self consumption.
2. Replacement pricing. Battery costs have fallen substantially over the past several years. Assuming year eight replacement at today's price is conservative, but currency movement could reverse that.
3. Household behaviour. Families grow, ACs get added, a son buys an electric bike. Consumption in year ten rarely resembles year one, which usually improves the numbers because more solar gets self consumed.

There is also a cost that never appears in these models: the hassle. A LESCO inspection that gets rescheduled twice, a meter reader who disputes a reading, an inverter fault on a Saturday in July. That is a real part of ownership, and it is why the quality of the installer matters more than a two percent difference in equipment price. See how to compare installers in Lahore.

Applying this to different system sizes

The method does not change with size, but the inputs do. Larger arrays export a bigger share of what they make, which drags the average value per unit down. Smaller arrays self consume nearly everything, which is why a modest system on a big bill often shows the best return per rupee.

Run the numbers for your own case using the calculator, then read the size specific pages: 3kW, 8kW and 15kW. For the shorter horizon view, solar payback period in Lahore works through three complete examples. Anyone weighing whether to bother at all should read is solar still worth it in Pakistan in 2026.

Households considering off grid or partial off grid builds should model differently again, since there is no export value at all and the battery does far more work. The off grid service page and off grid guide cover that case. For grid connected builds, the net metering service and hybrid and battery service pages describe what is actually installed.

System quality drives most of the variance in real returns. A build in Johar Town or Wapda Town using proper galvanised structure and Tier-1 hardware will comfortably outperform a cheaper array that spends its fourth year waiting for parts.