Does system size determine whether rooftop solar pays off without subsidies?
Yes, larger systems are far more likely to be cost-effective without subsidies. A 2024 study of seven residential system sizes in Indonesia found that small 2.75 kWp systems had a negative net present value (NPV) of -9.71 million Indonesian rupiah and a payback period of 12.4 years, meaning they lost money over 20 years [1]. In contrast, systems of 7.7 kWp and larger achieved positive NPV (up to 89.95 million rupiah for a 19.8 kWp system) and payback periods under 10 years [1]. The levelized cost of electricity (LCOE) for these larger systems was 1,082-1,205 rupiah per kWh, which is 11-36% cheaper than the local grid tariff of 1,352-1,699.53 rupiah per kWh [1]. So, for a household that can install a larger array, rooftop solar can be a sound investment even without subsidies.
The key threshold in this study was 7.7 kWp — below that, systems were not self-sustaining without subsidies [1]. This suggests that homeowners considering solar should carefully size their system to match their electricity consumption and roof space, aiming for a capacity that crosses the local break-even point.
How does where you live affect the cost-effectiveness of rooftop solar?
Your neighborhood's layout and building density can make or break the economics of rooftop solar, independent of subsidies. A 2023 study in Accra, Ghana, compared high-income, middle-class, and low-income neighborhoods and found that 92% of houses in well-planned high-income areas had rooftop solar potential with LCOE values between $0.02 and $0.19 per kWh [3]. In contrast, only 51% of houses in dense, unplanned low-income neighborhoods fell within that same cost range [3]. The low-income areas had higher building density and clustered patterns, which reduced suitable rooftop area and increased shading, driving up costs [3].
This means that even if a government offers capital subsidies, their effectiveness is limited in low-income neighborhoods due to physical constraints [3]. The study suggests that community solar schemes may be a better fit for such areas, while high-income neighborhoods can benefit from building-integrated solar panels [3]. So, for a household in a dense urban area, rooftop solar may not be cost-effective without subsidies, regardless of system size.
Does hot weather reduce the cost-effectiveness of rooftop solar?
Yes, higher temperatures reduce solar panel efficiency and worsen the economics. A 2023 study from India quantified this effect: for every 1°C rise in module temperature above the reference of 25°C, the energy payback time (EPBT) increased by 8.5 days, and the unit cost of electricity rose by 0.021 Indian rupees (INR) [5]. Over a 30-year system life, this temperature penalty also reduced the value of carbon credits by INR 355.93 per degree Celsius [5].
The study's base-case LCOE for a rooftop system in India was INR 5.37 per kWh at a 5% interest rate, but this increased with higher module temperatures [5]. For homeowners in hot climates, this means that the actual cost savings from solar will be lower than theoretical estimates, and the payback period will be longer. Proper ventilation and mounting (e.g., tilted rather than flat) can help mitigate these losses, but the temperature effect is a real factor to consider when evaluating unsubsidized solar.
Sources used in this answer
Techno-Economic of Rooftop Solar Power Plants for Residential Customer in Indonesia
In Indonesia, rooftop solar systems larger than 7.7 kWp achieved positive NPV and payback under 10 years without subsidies, while smaller systems (2.75 kWp) had negative NPV and 12.4-year payback [1].
Techno-Economic Feasibility Analysis of PM Surya Ghar - Muft Bijli Yojana in Jammu & Kashmir, India: A GIS-Based and Financial Modeling Approach
In Jammu & Kashmir, India, the PM Surya Ghar scheme with subsidies yielded a payback period of 5-6 years and IRR >12%, but without subsidies the economics would be less favorable [2].
Beyond costs: How urban form could limit the uptake of residential solar PV systems in low-income neighborhoods in Ghana
In Accra, Ghana, 92% of high-income neighborhood houses had rooftop solar LCOE between $0.02-0.19/kWh, compared to only 51% in low-income areas, due to dense, unplanned urban form limiting potential [3].
Opportunity of rooftop solar photovoltaic as a cost-effective and environment-friendly power source in megacities
In Beijing, China, rooftop solar potential is 15.4 TWh annually, and can be cost-effectively integrated with smart management of electric vehicles and air conditioners, reducing transmission needs by 8.6 GW [4].
Quantitative impact assessment of temperature on the economics of a rooftop solar photovoltaic system.
In India, each 1°C rise in module temperature above 25°C increases energy payback time by 8.5 days and unit electricity cost by INR 0.021, reducing carbon credit value by INR 355.93 per degree [5].