Path-Q Solar

How does solar ROI differ from simple bill-savings payback?

Answer

Simple payback asks how long cumulative savings take to recover cost; ROI measures return relative to investment and can include timing, ongoing costs, incentives, financing, degradation, and residual value.

Key points

  • Payback is easy to understand but ignores post-payback returns and discounting.
  • ROI definitions vary, so the formula must be stated.
  • For long-lived systems, discounted cash flow may be more informative.

What it depends on

  • Chosen financial definition
  • Cash flows and timing
  • Financing and residual value

Risks and trade-offs

  • Different ROI formulas can produce incomparable results.
  • Forecast uncertainty remains significant.

Information you may need

  • Cash-flow schedule
  • Discount rate
  • All costs and benefits

Your next step

What to do next

Ask for the exact ROI formula and compare it with simple payback and net present value.

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