A Simple Way to Calculate Solar Power Savings for Households
Many of you have messaged me saying that formulas like IRR and NPV are a bit overwhelming.
I completely agree. For households, I use a much simpler calculation method that is still sufficient for making decisions.
The key lies in just 2 numbers:
- The electricity bill you would have paid (without solar power)
- The actual electricity bill paid after installing the system
From there, you can immediately deduce whether it's profitable or not, and more importantly, know the actual unit price of electricity you are paying per kWh.
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1) The calculation method I use monthly
Step 1: Finalize the total kWh consumed for the month
Take the actual electricity usage for the month (from the utility app or main meter).
Step 2: Calculate the "bill you would have paid"
Use that exact consumption level and apply the EVN tariff at the time of calculation.
Step 3: Get the "actual bill paid"
This is the bill after the solar power has offset the load.
Step 4: Calculate 3 sufficient indicators
- Monthly savings = Bill you would have paid - Actual bill paid
- Electricity unit price before investment = Bill you would have paid / Total kWh consumed
- Actual electricity unit price after investment = Actual bill paid / Total kWh consumed
That's it. No need for complex financial models to clearly see the efficiency.
2) My practical example
From actual operational data:
- Electricity bill you would have paid (without solar): about 3.4 million/month
- Actual electricity bill paid after optimal operation: about 1.55 million/month
=> Savings: about 1.85 million/month
If converted to the average unit price of electricity for the same consumption level:
- Before investment: significantly higher unit price
- After investment: drastically reduced actual unit price
This exact difference is what helps me recover the capital in about 24 months.
3) Why is it profitable according to this simple calculation?
a) Early investment
Every month delayed is a month of lost electricity savings.
If you've decided to use electricity long-term in your current home, doing it early is usually more beneficial.
b) Load following
Solar power used immediately on-site has the highest value.
The closer it follows the daytime load, the better the efficiency.
c) A small capacity is enough
I prefer building just enough, not chasing overly large systems.
Start small to recover capital quickly, get real operational data, and then expand.
4) Principles for choosing capacity for households (practical)
- Prioritize offsetting the important daytime load first
- Don't try to "cover 100% at all times" right from the start
- Choose a system that is easy to operate and maintain
- Monitor for the first 2-3 months before deciding to upgrade the capacity
In short: go from small to medium, don't over-size on day one.
5) Quick checklist before spending money
- Gather electricity bills for the last 12 months
- Determine the true daytime load
- Install a load-following system with just enough capacity
- Monitor 3 indicators every month:
- The bill you would have paid
- The actual bill paid
- The actual electricity unit price after investment
Just doing these 4 steps consistently will manage financial efficiency very well.
Conclusion
If you ask me one brief question: should I invest in solar power?
I maintain a clear view:
- Should invest early
- Should build a load-following system
- Should start with a small, sufficient capacity
For households, there's no need to calculate too complexly. Just tracking exactly "2 bills" every month is enough to know if the system is helping you pay less for electricity.
If you guys need it, I will share a super compact tracking template (3 columns of data) to self-check the monthly efficiency in 1 minute.