Path-Q Solar

What assumptions make a solar ROI estimate unreliable?

Answer

An ROI estimate is unreliable when it relies on optimistic or unexplained assumptions about production, electricity prices, export value, system life, costs, financing, or tax treatment. The estimate should disclose each assumption and show sensitivity or scenario results.

Key points

  • Common problems include using ideal production, ignoring shading, and assuming no degradation or downtime.
  • Assuming all generated electricity has the same value can overstate savings.
  • Omitting maintenance, insurance, inverter or battery replacement, and financing fees understates costs.
  • Unverified incentives, tax treatment, utility rules, or price escalation can materially change the result.
  • A single ROI percentage is less informative than annual cash flow and a range of outcomes.

What it depends on

  • Quality of the production estimate
  • Electricity rates and export treatment
  • System and financing costs
  • Future maintenance and replacement assumptions
  • Tax, incentive, and ownership assumptions
  • Analysis period and discount rate

Risks and trade-offs

  • More conservative assumptions may reduce the headline ROI but improve decision usefulness.
  • Long analysis periods increase exposure to uncertain prices, equipment performance, and household circumstances.
  • Simple ROI may ignore when cash flows occur and therefore differ from an internal-rate-of-return analysis.

Information you may need

  • The complete calculation and all input assumptions
  • A production estimate tied to the actual site
  • Contract, financing, and maintenance costs
  • Scenario results for production, prices, costs, and system life

Your next step

What to do next

Audit the estimate line by line and request a sensitivity table showing which assumptions change ROI the most.

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SQ01654