Path-Q Solar

How should I evaluate solar ROI if I expect electricity prices to change over time?

Answer

Evaluate ROI as a range rather than relying on one electricity-price forecast. Model flat prices, moderate growth, and low-growth or declining scenarios, and apply each scenario only to the portion of electricity the system offsets or exports under the applicable terms.

Key points

  • Separate avoided on-site electricity purchases from exported energy because they may have different values.
  • Use a consistent discount rate when comparing future savings with today's investment.
  • Include system degradation, maintenance, replacement costs, financing, and any uncertain benefits.
  • Focus on the break-even price-growth assumption at which the investment meets your target return.

What it depends on

  • Current bill structure and time-varying rates
  • Self-consumption and export assumptions
  • Production degradation
  • Installed and financing costs
  • Chosen discount rate and analysis period

Risks and trade-offs

  • High assumed rate growth can substantially overstate ROI.
  • Low growth reduces savings but may not eliminate the value of offsetting current rates.
  • Changes in tariffs or export terms can matter more than broad average price growth.

Information you may need

  • Recent bills and rate schedule
  • Expected annual production by month or time period
  • Export compensation rules
  • Cash price or full financing cost

Your next step

What to do next

Build a sensitivity table showing ROI, payback, and total savings at several price-growth assumptions, including a zero-growth case.

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