Calculating Solar ROI
- December 2, 2014
How to Calculate Solar ROI
Solar energy is a rapidly growing industry, thanks to the dramatic drop in prices for solar energy systems in the past decade. In most cases it is more cost effective to implement a solar energy system than to buy electricity from the local utility company. Solar provides predictably priced electricity for 20-30 years, making it easy for businesses to forecast operational expenses.
Combined with innovative financing options that further reduce upfront costs, solar has a new value proposition that makes business sense for your business. The following is intended to help you make the business case for solar at your company. Each individual case will vary so contact Sunworks for a No-Obligation Quote and we will help you perform the calculations.
7 Steps to Calculating ROI
When considering an investment in solar panels, it’s important to look at two calculations: Annual ROI (Return on Investment) and payback period. The ROI is how much return on your investment you’ll get each year. The payback period is the timeline for when your solar panels have paid for themselves.
- Review the last 12 months of your electricity bills to determine the AVERAGE MONTHLY ELECTRICITY BILL AMOUNT. In many cases, your local utility company can supply this information via past utility statements.
- Determine the total installed cost of a solar energy system. This includes expenses such as PV panels, installation costs, permits, etc. Look on a recent electric bill from your utility company to determine how much you pay per kilowatt hour (kWh). Our Sunworks consultants can help you through the entire discovery process. To request an estimate of installed costs, complete our FREE Estimate Request
- Your assigned Sunworks representative will help you determine how much electricity your solar panels will generate.
- Sunworks will also identify the types of federal, state, and local government incentives you can take advantage of for your solar project.
- Your assigned Sunworks Customer Experience Representative will talk you through available financing options based upon your unique needs.
- Calculate the total financial benefit of your solar system. This includes any SRECs you can sell to the utility company to help them meet their renewable energy requirements.
- Calculate your solar panel payback period and return on investment (ROI). (Solar Payback Period = Initial Net Investment / Yearly Benefit). For example, if your installed solar panel costs were $15,000 and your yearly benefit was $3,000, your payback period would be 5 years. A typical 5 kW solar PV system can easily see an ROI of 20% in the first year.
To find out how long it will take solar panels to pay for themselves, call us at 866-600-6800 for a FREE personalized estimate.
Business Justifications for Solar
Solar can dramatically reduce your operating costs on Day 1, while protecting your business from unpredictable rising energy rates. Most importantly, solar helps decrease your carbon footprint and in increasing areas, help you meet environmental requirements. Simply put, solar makes good financial sense.
- Solar energy systems have little/no moving parts which means minimal operation and maintenance (O&M) is needed
- 25-year warranty gives you peace of mind
- Solar dramatically reduces your utility operational expenses
- Producing your own electricity from solar protects you from rising energy rates in the future
- Many businesses achieve 15-25% in after-tax returns
- Government incentives and rebates may reduce 30% or more of costs
- Lease options are available to avoid upfront costs
- Solar helps you meet government-mandated greenhouse gas emission targets by reducing your carbon footprint
- Going green promotes your company as an environmentally responsible and likeable company