Path-Q Solar
How should I compare payback when two solar proposals have different system sizes?
Answer
Compare each proposal using the same calculation method, not just the number of years shown. Calculate net upfront cost divided by expected first-year net savings, then compare lifetime cash flow, energy production, and cost per usable unit of energy. A larger system may have a longer payback but still produce greater total savings if the additional generation is valuable.
Key points
- Use comparable assumptions for system degradation, maintenance, financing, incentives, electricity prices, and export compensation.
- Separate savings from energy used on-site from the usually different value of energy exported to the grid.
- Check whether the larger system produces more energy than you can use or export economically.
- Compare net present value or total undiscounted savings in addition to simple payback.
What it depends on
- Net installed cost for each proposal
- Expected annual production and degradation
- Your electricity use and hourly usage pattern
- Self-consumption and export compensation assumptions
- Financing and operating-cost assumptions
Risks and trade-offs
- A larger system can add low-value exported energy and weaken incremental payback.
- A short payback based on optimistic production or bill savings may not represent actual performance.
- Simple payback ignores the time value of money and the value of capital used for the purchase.
Information you may need
- Itemized cash price or financed cost for both systems
- Production estimates using a common methodology
- Your recent interval or monthly electricity use
- Current export terms and utility bill structure
Your next step
What to do next
Recalculate both proposals in a side-by-side model using identical assumptions and report total cost, annual on-site savings, export value, payback, and lifetime cash flow.
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