Path-Q Solar
What financial risks should I consider if solar savings depend on future electricity price increases?
Answer
Treat projected electricity-price increases as uncertain rather than guaranteed. Model the system under flat, low-growth, and high-growth price scenarios, and check whether it remains acceptable when savings are lower than expected.
Key points
- Lower-than-projected electricity-price growth can extend payback and reduce lifetime savings.
- Savings also depend on system production, degradation, consumption, export compensation, fixed utility charges, and maintenance costs.
- A forecast that uses a single escalating price assumption can overstate ROI.
What it depends on
- Current electricity cost and bill structure
- Expected self-consumption and export compensation
- System production, degradation, operating costs, and financing
- Time horizon and whether the property may be sold
Risks and trade-offs
- Conservative assumptions may make the investment appear less attractive but reduce forecast risk.
- A system sized mainly for future price growth may be oversized if consumption or prices remain stable.
- Fixed charges or unfavorable export terms may limit savings even when energy prices rise.
Information you may need
- Recent utility bills and tariff structure
- Production estimate and system degradation assumption
- Financing, maintenance, insurance, and replacement costs
- Several electricity-price scenarios rather than one forecast
Your next step
What to do next
Recalculate the proposal using flat, moderate-growth, and no-export-value scenarios, then compare payback and total cost under each.
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