In algal pond used for treating wastewater, a part of the solar radiation (PAR) is used by algae for photosynthesis, and rest of the solar energy is wasted. To date, no studies have been conducted that optimize these aspects (wasted solar radiation for heat production) from an operational cost perspective. Therefore, a model is developed for the estimation of photosynthetically active radiation (PAR) from solar radiation. Subsequently, derived PAR was utilized in the optimization algorithm. Experimental data on PAR and solar radiation were used to obtain empirical parameters of the developed model. Using empirical parameters, diurnal PAR was estimated for other locations for which the diurnal variation of solar radiation was not available. Afterwards, the estimated solar radiation was used to obtain the cost of algal biomass production using wastewater. For this purpose, a cost function was minimized. The cost function contains various cost components of algae-based wastewater treatment. The major costs of the treatment were incurred by the sunlight harvesting, and distribution equipment, whereas the major income was registered through the conversion of sunlight to heat and biomass production. The yearly cost of treating 1m3 wastewater in the proposed wastewater treatment plant could be varied from 186 to −44 (Rs, INR). The capital cost of constructing a proposed treatment plant having a capacity of 1000 m3/day varied from 11–45 crores INR.