Path-Q Solar

How do I compare solar ROI with investing the same money elsewhere?

Answer

Compare solar's after-tax, risk-adjusted cash flows with the alternative investment's expected after-tax return over the same period. Include the solar system's upfront cost, bill savings, exports, operating costs, degradation, residual value, financing, and uncertainty rather than comparing a simple payback period with an investment percentage.

Key points

  • Use a common time horizon and discount rate.
  • Model solar savings as uncertain cash flows, not guaranteed returns.
  • Include liquidity, risk, taxes, and the opportunity cost of using cash for solar.

What it depends on

  • Installed cost and payment method
  • Expected bill savings and export value
  • System life, degradation, maintenance, and residual value
  • Alternative investment return, volatility, liquidity, and taxes

Risks and trade-offs

  • Solar may provide a less liquid and less diversified return than financial investments.
  • Investment returns are uncertain, and solar savings are also sensitive to rates, production, and equipment performance.
  • Using financing changes both solar cash flows and the amount available for other investments.

Information you may need

  • Itemized solar cost and financing terms
  • Production and bill-savings model
  • Alternative investment assumptions
  • Tax treatment and preferred comparison horizon

Your next step

What to do next

Compare both options using after-tax net present value and internal rate of return under conservative, central, and adverse scenarios.

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