Path-Q Solar

How can I compare the financial return of rooftop solar with other home improvements?

Answer

Compare each project using consistent assumptions for upfront cost, financing, annual cash benefits, maintenance, useful life, replacement, residual value, risk, and time value of money. Solar should be compared not only by payback or ROI but also by nonfinancial benefits, durability, comfort, resilience, and whether another improvement reduces energy use before solar is sized.

Key points

  • Use net present value or internal rate of return alongside simple payback.
  • Compare projects over appropriate useful lives rather than forcing every project into one period without explanation.
  • Account for interactions, such as efficiency reducing the solar system size or a roof project enabling solar.
  • Use conservative, central, and optimistic scenarios for uncertain savings.

What it depends on

  • Cost and financing of each improvement
  • Expected energy savings or other benefits
  • Useful life, maintenance, and replacement needs
  • Household priorities and expected time in the home

Risks and trade-offs

  • Projects with different risk, duration, or nonfinancial value may not be fairly ranked by one metric.
  • Projected energy savings can be uncertain and behavior-dependent.
  • Financing one project while paying cash for another can distort the comparison.

Information you may need

  • Itemized costs and financing terms
  • Independent savings or performance estimates
  • Maintenance and replacement assumptions
  • Priority, comfort, resilience, and property plans

Your next step

What to do next

Create a common comparison table with discounted cash flows and nonfinancial objectives for solar and the leading alternative improvements.

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