 # Blog #### What’s the best way to calculate ROI for a really small solar home system?

###### Feb 24, 2023 in World

Calculating the Return on Investment (ROI) for a small solar home system can be done using a simple formula that takes into account the initial cost of the system, the savings generated by the system, and the payback period. Here are the basic steps to follow:

1. Determine the initial cost of the system: This includes the cost of the solar panels, the inverter, the battery bank, any installation fees, and any other related costs.
2. Estimate the savings generated by the system: The savings will depend on the energy consumption of the home, the cost of electricity in the area, and the amount of energy the solar system is able to generate. To estimate the savings, you can use the following formula:

Annual savings = (Energy generated by the system per year) x (Cost of electricity per kilowatt-hour)

1. Calculate the payback period: The payback period is the amount of time it takes for the savings generated by the solar system to equal the initial cost of the system. To calculate the payback period, divide the initial cost of the system by the annual savings:

Payback period = Initial cost of system / Annual savings

1. Calculate the ROI: The ROI is the ratio of the total savings generated by the system to the initial cost of the system, expressed as a percentage:

ROI = (Total savings generated by the system / Initial cost of the system) x 100

For a small solar home system, the initial cost may be relatively low, and the savings generated may not be as significant as for a larger system. However, even a small solar home system can provide some energy savings, and it’s worth calculating the ROI to determine if it’s a worthwhile investment.