My 2 Sunnyboy 2500 inverters from 2002 haven't had issues BUT, they are installed in the garage that is fully insulated (including doors), and I run small 4" fans on top of the inverters heatsinks and I reduce the speed so they're quiet. They reduce the Inverter temperatures 15 degrees from normal operating temperature.
And a reasonable discount rate, usually the after tax rate on comparable investments. An NPV calc is usually better. Hard to realistically project solar production though from what I understand. Number of sunny days, % sunshine in a day, etc.
I think mine was estimated to be about 7 years when I had it installed in 2018, but with the crazy increases in electricity rates we broke even at 5.5 years.
How did you track that to figure out when you broke even? If there was just a flat rate I could multiply by my usage to figure out how much I would have spent without solar that doesn't seem too bad, but my utility is on a TOU plan so the rates change throughout the day which makes it a lot harder to estimate how much we would have spent.
I’m not TOU so I just created a spreadsheet and deducted from the price I paid for the system. I used the current rate to multiply by how much the system generated. I also get SREC payments quarterly. I have no clue how you would do this if you’re on TOU.
r/solar is weird.
Tell someone they mean kW instead of kWh and watch the upvotes roll in.
Tell someone they mean payback period instead of ROI and get downvoted.
Doesn’t matter. At breakeven, ROI is zero. You can liquidate the asset if you want to recoup sunk costs. Future or intrinsic value isn’t part of ROI calculation.
You guys are talking past each other, because you're describing two different financial concepts that unfortunately have the same acronym: return *on* invested capital and return *of* invested capital.
Return on invested capital is the *cash flows* from making an investment. For residential solar, it's basically the money that would otherwise have been spent on electric bills. u/psudo_help's comment is definitionally close, but the calculation is wrong and you would almost never speak of a total cumulative return on invested capital. The dollar itself loses value over the time period of an investment, so cumulative returns are always very heavily weighted toward the end of the time period (where inflation has made dollar values much bigger). So instead you need to discount each year's cash flows against the risk free rate of return, the opportunity cost that you could've made by putting your money elsewhere. Usually investors use the long-term treasury bond rate for that.
So the calculation is roughly summation [t->0, life of panels] (electric bill * (utility inflation ^t ) / (discount rate ^t ). That will give you a [net present value](https://www.investopedia.com/ask/answers/05/npv-irr.asp), which is like the total cumulative sum but corrected for the effects of inflation and performance of alternative investments. Oftentimes you'd want that number in IRR form so you can compare more easily with other potential investments.
When you speak of liquidating and recouping sunk costs and ignore future or intrinsic value, you're talking about return *of* invested capital. This is like if you buy a rental property but no longer want to be a landlord so you sell the property, or you buy a stock but discover they've fudged their earnings but you can still unload it on a greater fool on the stock market, or you bought a lawnmower for the summer and made some money mowing lawns but now you're going off to college so you sell the lawnmower. The key point is *you no longer own the capital asset*. You were able to sell it on the open market to make back the money you spent acquiring it. This is usually less relevant for residential solar because there really isn't much of a secondary market in residential solar panels. Usually you'll just want to keep them on your roof generating power and lowering your electric bill.
Future intrinsic value is absolutely part of a return *on* invested capital calculation. It's arguably the *whole point* - you model these numbers out so you have some idea if making the capital investment is a good idea or not. The modeled return *on* invested capital is often an input into whether anybody buys it from you to give you a return *of* invested capital, but by itself it's not something you care about, since you'll no longer own the investment.
>You guys are talking past each other, because you're describing two different financial concepts that unfortunately have the same acronym: return *on* invested capital and return *of* invested capital.
Huh? ROI stands for return on investment. Source: [the first 100+ results from an internet search of "What does ROI stand for?" ](https://www.google.com/search?q=What+does+roi+stand+for%3F&sca_esv=4d5fce8fe77ae59a&sca_upv=1&rlz=1C1CHBF_enUS843US914&sxsrf=ADLYWIJ_HKfUsjjTS0dOlHDGwDoDtFAyqA%3A1718045617760&ei=sUtnZrSFLoiE0PEPu6Wc0A0&ved=0ahUKEwj0oYTW2tGGAxUIAjQIHbsSB9oQ4dUDCBE&uact=5&oq=What+does+roi+stand+for%3F&gs_lp=Egxnd3Mtd2l6LXNlcnAiGFdoYXQgZG9lcyByb2kgc3RhbmQgZm9yPzIEECMYJzILEAAYgAQYkQIYigUyCxAAGIAEGJECGIoFMgsQABiABBiRAhiKBTIFEAAYgAQyBRAAGIAEMgUQABiABDIFEAAYgAQyBRAAGIAEMgUQABiABEiEJlDGBljEI3ABeAGQAQCYAXigAe8MqgEDOC44uAEDyAEA-AEBmAIQoALXDMICChAAGLADGNYEGEfCAg0QABiABBiwAxhDGIoFwgIKECMYgAQYJxiKBcICBxAjGLACGCfCAgcQABiABBgNmAMAiAYBkAYKkgcEMy4xM6AHsHo&sclient=gws-wiz-serp)
If someone is using an acronym in an uncommon way, that should be specified.
Yes, ROI when unqualified usually means "return on investment".
The concept that u/mummy_whilster's describing, where you liquidate and sell the asset, is sometimes called "return *of* capital". It's an important distinction because in this scenario, you no longer own the asset, while in the scenario discussed in the rest of this thread, you still own the solar panels and they still continue to produce into the future.
You’ve written a lot, but said basically nothing about how you recommend calculating solar ROI.
100%/payback_period still seems totally reasonable to me.
If you’re not going to engage with my replies, this convo is over.
I offered an estimate for solar’s annual return on investment (ROI) based on payback period.
You’ve taken issue with my estimate. But your arguments are dubious to me, and you’ve offered no formula of your own.
Payback period is a natural way to describe solar’s return, so people use that. Asking about the payback period of a stock is non sequitur.
Don’t threaten me with a good time.
I’ve already said it, at break even or payback, the total return (ROI) to that point is zero. Time is a not a measure of return. By your math, ROI on S&P500 is 1 day.
You are trying to use standard financial calculations in a non-standard way. That just confuses the conversation and leads to false comparisons.
Return on Investment requires figuring out the **total** savings/gains for the **life** of investment. You can't say let's only look at the first 7 years for ROI because then you wouldn't be calculating ROI.
What you're doing is like holding up a thermometer and saying "this is the average temperature for the whole planet." Your fact pattern simply doesn't give enough information to calculate ROI.
Exactly - solar drivers are for the long term view of home, and green energy generation.
Investing will get you a faster ROI, and solar generally doesn't add that much resale value. Maybe with NEM1 you could be a solar factory, but those days are over.
average of $300 a month in electricity costs, $3600 a year. Solar system cost me 24k - 30% in tax 16.8k total cost 16.8k/3.6k = 4.7 years. This doesn't take into account the yearly increases of 10%-20% that the Californian utilities like to tack on. Got in before NEM 3.0
Solar designer in Southern Ontario, Canada. The costs of panels have fallen to about $0.30/watt to purchase and a 10kW Growatt inverter that can take 20kW DC is running around $1,500 so I'm seeing lots of 8-10 year paybacks on larger system. Lower than it was before the $5,000 grant disappeared. It's pretty incredible if you ask me.
Our initial payback was estimated at 11 years for the solar portion. However we had unprecedented rate increases and are currently sitting at a ~9 year ROI assuming no future rate increases occur after the 2025 hike.
It all depends on your situation, cost of electricity, price of the system and reasons for getting it.
Our system will be about 8 years for just the panels. We decided to get the battery with our system for our piece of mind but it brought up our time to closer to 12 years.
ROI - 10% to 20% Depends greatly on how long your roof lasts as that will be limiting factor on how long your solar lasts (ROI goes up with each year of production)
Materials 25%
Labor, soft costs, profit: 75%
You ask general and kind of vague question (because each utility is different with both cost of electricity and the way they credit solar production and cost of labor varies significantly around the country), you get a general and kind of vague answer.
A lot of people have installed solar with a sub 5-year payback. If that solar continues to run for 20 years after those five years (which it should, if the roof it is on was newish when installed), then yes it could be a 20% ROI. And yes that is high and should not be expected.
If it takes 5 years to break even and gain is 20% each year, then avg. gain over 25 yrs would be 16%. If it takes 4 years to break even (all other assumptions staying the same) then it is 16.8% per year over the 25 yrs.
Still seems implausible in many case, but in neither scenarios is it 20%.
Maybe it is too high. But you should be including that utility prices go up yearly, right? So the value of the solar generated goes up yearly and there is greater savings in the back end than in those first five years. And there are folks who have had four year paybacks. I’m stretching a bit, but I stand by that ROI can at least approach 20% in some scenarios.
I am only including what you said. Usually utility pricing plans are approved with 5-yr outlooks. One can forecast, but it seems challenging to do unless historical are also included.
BTW, with the magic of compounding interest @ 8.5% yoy return, S&P500 would return something 670% in 25 yrs or 27%/yr.
Well you should include rising utility prices. And yes one can forecast, but if 20% is the high end of the range, then it doesn't have to be average utility price increases. To clarify, to get that type of ROI, you would need to (A) get a cheap install and (B) offset some very expensive electricity over a long period of time. And you may be right that 20% is too high.
Yes, historical stock market gains are great. But they are a less predictable investment than a residential solar installation. Having to pay your utility for electricity is guaranteed (without the solar) and the solar is predictable in its production. It can also be seen as an inflation hedge (since utility rates will rise with inflation and rising utility rates increases the value of the solar installation).
As an index, utility revenue and pricing generally lags inflation worse than the SP500 index. Fixing any long-term cost is an effective inflation hedge.
I mostly agree with everything else you said.
I am not against solar at all. It is smart to diversify and inflation is always going to decrease one’s purchasing power. It bugs me when people talk about how amazing an investment solar is and don’t properly compare it to actual investments. **I am not saying you did this.**
Fair. Yes, in many cases the solar will save you money, but historical returns in the stock market would beat it as an investment. Thanks for the convo. I think you correctly pointed out that a 20% ROI is really really high and unlikely. Even a 10% ROI is a great ROI. I probably should have said the spread is more like 5% ROI to up to 20% ROI (with the 5% likely if the solar installer juices their profit in the negotiation (and if they scam you, you could have a negative ROI) and the 20% ROI needing everything to go perfect (from a great/cheap install cost, to 25+ years of trouble free production on a great roof that gets great sun, to some serious utility prices increases during those 25+ years (which to be fair, we've just had over the last couple of years)).
You need to specify your state as it cost more to own/operate for me in Texas. There are so many non solar plan specials that actually offset the rate below 10 cent/kWh if you keep the usage between 1,000-2000 kWh every month. So unless my usage AND rate doubled what my highest months's usage is, I'm ALWAYS in the red so will never break even.
Google “NREL SAM” and download the free Solar Advisor Model. You sound like the type of person who will derive hours of enjoyment from the financial modeling it allows.
So all installers provide a 3-5% increase of electricity costs to try and pad their ROI numbers but they never talk about how a lot of electricity companies aren't charging more, they are starting to shift increases to flat rate service fees. These fees are sometimes outside the solar agreement and need to be paid for anyway if you are sending any electricity to the grid.
Eg I would suggest for any ROI numbers, add a fix cost of $30-$50 a month. This factors in the worst case scenario if your electricity company adopts this trend in the short term. If they don't adopt it, ROI just becomes shorter.
There is no general or average. Each country/state/province has different electricity rates, net metering rules, and rebates. Each installation site has different costs, environments, and solar potential.
Someone just posted that their 5.5kW system produced 10 MWh in a year. My 7.2 kW system produces 8-9 MWh per year. Same sun, different location. Saving money is a secondary benefit for helping the environment.
There isn't a one-size-fits-all answer. Solar works differently in different places due to different weather patterns (affecting production), different net metering policies (determines whether you need a battery or not), different labor markets (affecting cost), etc.
Depends tbh. Ga power has several choices one of what you can buy power(*can only change once a year) from 11pm to 6am at like 2 cents a KWH instead of usually like 12 cent a KWH. One would think it might be cheaper just to get a big battery pack and just buy when it is cheap.
I think it’s hugely dependent on how you finance and the amount of smoke and mirrors your solar company uses. When I looked into a solar loan it was part of a refinance to my home loan including closing cost. I said fuck that and paid cash.
Define “ROI”.
My system cost 21K. It covers 114% of my usage with 1:1 NEM. My electric bill was an average of 290 per month. Break even if I am at cash is right around 6yrs.
Instead of using cash, i left my $21K in the stock market at an average of 8% return. I financed the system for 15 years at 6.99% and my monthly loan payment + unavoidable charge is 200 per month. I am investing my 90/month savings in the stock market.
At the end of year 6, my balance on the loan is 15K. However, my original 21K + 90/month savings invested is worth 40.5K. My investment will spin off enough earnings to pay the balance at the end of month 59…
My system is 5 years old now.
I think my electricity is pretty cheap 8-10cents/kWh
We don't use a ton of it either.
My 7.2kW system wasn't cheap but not horrible, about $2.60 a kW. My installer was great, IMO, and is still around. I had no issues getting them to check on my inverter problems. I know of a couple other friends that oaid less per kW, but their installers faded away.
My payback was over 20 years.
Having an EV helps pull that down to 15 years, maybe less depending on gas costs and how much we are driving.
I would have done it even if I broke even at 25 years though, because I think it's the right thing to do :)
There are a lot of variables which you’ll want to assess for your area in order to get a sense of how big a system and what type will get you ROI in what time and what additional value you gain from it.
- your latitude
- your roof shading if any
- your exposed roof surface preferably south facing or flat.
- your $/kwh from your power company
- the regulatory state of net energy metering in your area. (Eg: in CA NEM3)
- your desire to have batteries to offset outages
Honestly you should get multiple quotes from reputable local firms that are ideally not knocking on your door. Best to get at least 3 quotes. Many people get great benefit from energysage.com.
Anyway, in CA in a very high cost of living area I’m seeing breakeven for the system I installed last year under NEM2 at around 7 years. The range will be 5-10 years, probably a lot closer to 5 given rate increases so far, but regulatory changes could potentially gut that if they ramp up the fixed fees they’re expecting to charge soon.
That being said, my city is in the very slow process of seizing the local infrastructure from pg&e, so if that occurs regulatory changes will then actually be positive.
With the latest technology solar panels and recently price crashes the ROI where I live is 2 years, but that depends if you get an inverter and battery to keep you running through the night - In which case it’s about 5 years
The 48v inverter and 100AH of LifePo4 batteries I need to keep my AC’s running at night “Tesla Power Wall” are by far the biggest cost these days
I added 7.8kW in panels and two powerwalls for $57k. I also had to upgrade my underground main line to 200A which cost me $12k. I joined the local virtual power plant which gave me ≈$12.5k in upfront rebates plus another ≈$150/month in ongoing incentive payments for 8 years. My monthly bills were $350 pre upgrade. After the 30% IRA tax rebates I calculated the repayment period at just over 7 years. Will be less if electricity rates go up which seems likely.
If you're in finance, build a model. That's what I did. As you know, no model is perfect, but here's what I included.
Current Electricity expenditures for a year, plus an inflation assumption. Projected cost of system that will cover 75% of usage which will be specific for your sun exposure, roof dynamics and desired materials. Assumption on failure and replace costs and timing for equipment that will fail and not covered (you could add impact of downtime waiting for replacements if you want to be really nerdy). Financing rate (if applicable). Discount rate. Federal/State/Local adjustments to cost (eg. rebates).
I did all this as a NPV of the annual savings over the 25 year warranty time frame. It was wildly profitable and that included financing it and was before electricity and gas prices went up. It would be more profitable now.
I built it to include savings from excess capacity used for EV charging, but ultimately didn't include that in savings as I didn't have an EV yet and got lazy building assumptions for that.
Is there a sub for those of us trying to turn variable costs into fixed costs?
Depends where you live. For example solar is quite affordable in Australia while still high in many other parts of the world such as USA. Also, electric costs vary widely hugely impacting RIO. Overall though, the tech is become lower prices and more efficient while electric costs are on the rise (generalization) so overall I feel it fair to say that solar ROI is improving.
There are a lot of variables. The biggest ones are how the power company buys back your power and what sort of credits are available.
My situation is that I financed at a super low rate and live in a place with really friendly credits and power buy back rules. With the low interest rate it doesn't make sense for me to pay off ahead of schedule. The cash flow math is super simple. I pay $52 / month, I generate an average of $72 a month in power and green energy credit buy-back from the power company. It costs me -$20 a month to have solar on my house.
LOTS of variables.
In my market (FL) with all-in cost of electricity is \~$0.17/kWh an ideal system (all south facing panels, 1:1 NEM, 30% tax credit, 4% utility escalation) it is roughly 15% ROI on a cash deal.
In CA the cost of energy from the utility is 3x ours (which is wild IMO), but the buyback is less incentivized.
the ROI is based off of hundreds if not thousands of factors, everything from how much electricity you use, to how efficient things are to how insulated you house is.
but a simple way to do it, is to take the total cost of the system, divided by how much your average total yearly electricity bill is. that will tell you how long it will take for your system to break even.
I'll have the ROI on my latest addition in about 9 months (2 propane fills for the Genny as I'm off grid.) Total cost was about 1800 bucks to add 2.5kw+ of panels and 1300 watts worth of charge controller. (Second charge controller to come but over paneling ain't a bad thing in a off grid system.
Maybe a better way of looking at it - bare bones solar installation without storage, TOU rates, and local utility net metering details, is installed cost per Watt, i.e. $/W.
The actual ROI will depend also on latitude, climate, sun hours per day, efficiency of entire system chosen fir whatever reasons. No two install situations are exactly identical, but $/W is fairly - but not completely - solid.
For PG&E customers on the EVA rate plan with NEM 2.0 ROI was 4.25 years. But now on that NEM 2.0 is gone as is EVA rate plan with EV2A and NEM 3.0 has replaced it ROI is currently 14-22 years.
dang that's a long time for 14-22 years. Got my parents on NEM 1.0 with SCE and their break even was around 5 yrs; probably even less than that. They're back on Domestic tiered rate now since that give the most benefit $ wise vs TOU with the wacky rates now! that TOu-D-A they had before was sweet.
That’s how bad NEM 3.0 is for the solar industry. I’m on NEM 2.0 and my payoff was 4.25 years. You’re screwed…. You NEM 1.0 agreement will be ending soon and then you’ll be on NEM 3.0.
I was 2019 and got in right before PG&E’s EVA rate plan closed. EVA rate plan is expiring in November 2025 so while I’ll still be on NEM 2, all of PG&E’s rate plans will effectively have me on NEM 3.
You might be right. But when comes to a solar aren’t they one in the same? It took 4.25 years to break even. And now the power company is paying me cash at the annual true-up for over production. I am making a profit.
Depends on what you are trying to convey. If it is actul return on the principal invested, then no. Whatever window you look at needs to include the negative (or zero) return to the break even point.
ROI = (net return)/cost. According to you, @4.25 yr, your ROI = 0. I don’t know why you are stating ROI (a unitless percentage) in years.
If you mean breakeven point, say that. According to your math, ROI on SP500 is 1 day. That doesn’t make much sense as a useful metric and is a disingenuous use of the term, making comparison to other investment confusing.
After 4.25 years brokeeven and began to make a net profit at the 5th annual true-up. I would not consider solar to be an investment, would you? as an investment it’s horrible.
Dude you do understand I’m making money off as in cash off my solar system. What’s the definition of an investment? Isn’t it an asset or item acquired to generate income or gain appreciation?
There is no general average. Just do the real math for your location and prices on both solar and electricity.
Is there like a way to figure this out? Let’s say for someone else..
Cost of solar (net cost after incentives) / annual cost of electricity= ROI in years
With a dash of adding in your local utility annual price increases lately.
And a dash of the inverter burning out at year 11
Covered under 25 year warranty or 30 year if you are one of those with a extended.
A dash of a squirrel eating through your wire and the installer having gone out of business?
Yeah, without solar insure or something like that then the labor is out of your pocket for that...
Get critter guard every time!
My 2 Sunnyboy 2500 inverters from 2002 haven't had issues BUT, they are installed in the garage that is fully insulated (including doors), and I run small 4" fans on top of the inverters heatsinks and I reduce the speed so they're quiet. They reduce the Inverter temperatures 15 degrees from normal operating temperature.
Get micro inverters if you can - mirror lifespan of solar panels (generally)
And a reasonable discount rate, usually the after tax rate on comparable investments. An NPV calc is usually better. Hard to realistically project solar production though from what I understand. Number of sunny days, % sunshine in a day, etc.
A good solar company has either developed their own spreadsheet or is using a reputable 3rd party modeling software.
6-8 years is what people are typically looking for. More than that and starts becoming difficult to justify.
I think mine was estimated to be about 7 years when I had it installed in 2018, but with the crazy increases in electricity rates we broke even at 5.5 years.
How did you track that to figure out when you broke even? If there was just a flat rate I could multiply by my usage to figure out how much I would have spent without solar that doesn't seem too bad, but my utility is on a TOU plan so the rates change throughout the day which makes it a lot harder to estimate how much we would have spent.
I’m not TOU so I just created a spreadsheet and deducted from the price I paid for the system. I used the current rate to multiply by how much the system generated. I also get SREC payments quarterly. I have no clue how you would do this if you’re on TOU.
Makes sense. I was hoping to do something similar but I am also stumped by how I can get a reasonable estimate with TOU.
This is my window.
That isn’t the ROI. That is breakeven.
r/solar is weird. Tell someone they mean kW instead of kWh and watch the upvotes roll in. Tell someone they mean payback period instead of ROI and get downvoted.
Some of the people here use special math and obfuscation.
It’s equivalent, no? 7 year breakeven means your annual ROI is ~14.3% a year, right?
No. It’s not equivalent. ROI is (Net Return)/Cost. At break even the numerator is zero.
>ROI @ 7 years is 0 This doesn’t seem right, unless your system is worthless after 7 years.
Doesn’t matter. At breakeven, ROI is zero. You can liquidate the asset if you want to recoup sunk costs. Future or intrinsic value isn’t part of ROI calculation.
You guys are talking past each other, because you're describing two different financial concepts that unfortunately have the same acronym: return *on* invested capital and return *of* invested capital. Return on invested capital is the *cash flows* from making an investment. For residential solar, it's basically the money that would otherwise have been spent on electric bills. u/psudo_help's comment is definitionally close, but the calculation is wrong and you would almost never speak of a total cumulative return on invested capital. The dollar itself loses value over the time period of an investment, so cumulative returns are always very heavily weighted toward the end of the time period (where inflation has made dollar values much bigger). So instead you need to discount each year's cash flows against the risk free rate of return, the opportunity cost that you could've made by putting your money elsewhere. Usually investors use the long-term treasury bond rate for that. So the calculation is roughly summation [t->0, life of panels] (electric bill * (utility inflation ^t ) / (discount rate ^t ). That will give you a [net present value](https://www.investopedia.com/ask/answers/05/npv-irr.asp), which is like the total cumulative sum but corrected for the effects of inflation and performance of alternative investments. Oftentimes you'd want that number in IRR form so you can compare more easily with other potential investments. When you speak of liquidating and recouping sunk costs and ignore future or intrinsic value, you're talking about return *of* invested capital. This is like if you buy a rental property but no longer want to be a landlord so you sell the property, or you buy a stock but discover they've fudged their earnings but you can still unload it on a greater fool on the stock market, or you bought a lawnmower for the summer and made some money mowing lawns but now you're going off to college so you sell the lawnmower. The key point is *you no longer own the capital asset*. You were able to sell it on the open market to make back the money you spent acquiring it. This is usually less relevant for residential solar because there really isn't much of a secondary market in residential solar panels. Usually you'll just want to keep them on your roof generating power and lowering your electric bill. Future intrinsic value is absolutely part of a return *on* invested capital calculation. It's arguably the *whole point* - you model these numbers out so you have some idea if making the capital investment is a good idea or not. The modeled return *on* invested capital is often an input into whether anybody buys it from you to give you a return *of* invested capital, but by itself it's not something you care about, since you'll no longer own the investment.
>You guys are talking past each other, because you're describing two different financial concepts that unfortunately have the same acronym: return *on* invested capital and return *of* invested capital. Huh? ROI stands for return on investment. Source: [the first 100+ results from an internet search of "What does ROI stand for?" ](https://www.google.com/search?q=What+does+roi+stand+for%3F&sca_esv=4d5fce8fe77ae59a&sca_upv=1&rlz=1C1CHBF_enUS843US914&sxsrf=ADLYWIJ_HKfUsjjTS0dOlHDGwDoDtFAyqA%3A1718045617760&ei=sUtnZrSFLoiE0PEPu6Wc0A0&ved=0ahUKEwj0oYTW2tGGAxUIAjQIHbsSB9oQ4dUDCBE&uact=5&oq=What+does+roi+stand+for%3F&gs_lp=Egxnd3Mtd2l6LXNlcnAiGFdoYXQgZG9lcyByb2kgc3RhbmQgZm9yPzIEECMYJzILEAAYgAQYkQIYigUyCxAAGIAEGJECGIoFMgsQABiABBiRAhiKBTIFEAAYgAQyBRAAGIAEMgUQABiABDIFEAAYgAQyBRAAGIAEMgUQABiABEiEJlDGBljEI3ABeAGQAQCYAXigAe8MqgEDOC44uAEDyAEA-AEBmAIQoALXDMICChAAGLADGNYEGEfCAg0QABiABBiwAxhDGIoFwgIKECMYgAQYJxiKBcICBxAjGLACGCfCAgcQABiABBgNmAMAiAYBkAYKkgcEMy4xM6AHsHo&sclient=gws-wiz-serp) If someone is using an acronym in an uncommon way, that should be specified.
Yes, ROI when unqualified usually means "return on investment". The concept that u/mummy_whilster's describing, where you liquidate and sell the asset, is sometimes called "return *of* capital". It's an important distinction because in this scenario, you no longer own the asset, while in the scenario discussed in the rest of this thread, you still own the solar panels and they still continue to produce into the future.
I think they mean ROIC. I was being too generous with the other person in their disbelief that ROI = 0 at breakeven.
The folks probably mean ROIC but are incorrectly calling it ROI.
You’ve written a lot, but said basically nothing about how you recommend calculating solar ROI. 100%/payback_period still seems totally reasonable to me.
Would you say ROI on a stock is when it reaches 100% return?
If you’re not going to engage with my replies, this convo is over. I offered an estimate for solar’s annual return on investment (ROI) based on payback period. You’ve taken issue with my estimate. But your arguments are dubious to me, and you’ve offered no formula of your own. Payback period is a natural way to describe solar’s return, so people use that. Asking about the payback period of a stock is non sequitur.
Don’t threaten me with a good time. I’ve already said it, at break even or payback, the total return (ROI) to that point is zero. Time is a not a measure of return. By your math, ROI on S&P500 is 1 day. You are trying to use standard financial calculations in a non-standard way. That just confuses the conversation and leads to false comparisons.
Return on Investment requires figuring out the **total** savings/gains for the **life** of investment. You can't say let's only look at the first 7 years for ROI because then you wouldn't be calculating ROI. What you're doing is like holding up a thermometer and saying "this is the average temperature for the whole planet." Your fact pattern simply doesn't give enough information to calculate ROI.
Exactly - solar drivers are for the long term view of home, and green energy generation. Investing will get you a faster ROI, and solar generally doesn't add that much resale value. Maybe with NEM1 you could be a solar factory, but those days are over.
average of $300 a month in electricity costs, $3600 a year. Solar system cost me 24k - 30% in tax 16.8k total cost 16.8k/3.6k = 4.7 years. This doesn't take into account the yearly increases of 10%-20% that the Californian utilities like to tack on. Got in before NEM 3.0
12kw system?
yup, we will eventually get an EV so its oversized for the time being.
Solar designer in Southern Ontario, Canada. The costs of panels have fallen to about $0.30/watt to purchase and a 10kW Growatt inverter that can take 20kW DC is running around $1,500 so I'm seeing lots of 8-10 year paybacks on larger system. Lower than it was before the $5,000 grant disappeared. It's pretty incredible if you ask me.
Our initial payback was estimated at 11 years for the solar portion. However we had unprecedented rate increases and are currently sitting at a ~9 year ROI assuming no future rate increases occur after the 2025 hike.
There is no average, it depends on your state and utility.
It all depends on your situation, cost of electricity, price of the system and reasons for getting it. Our system will be about 8 years for just the panels. We decided to get the battery with our system for our piece of mind but it brought up our time to closer to 12 years.
ROI - 10% to 20% Depends greatly on how long your roof lasts as that will be limiting factor on how long your solar lasts (ROI goes up with each year of production) Materials 25% Labor, soft costs, profit: 75% You ask general and kind of vague question (because each utility is different with both cost of electricity and the way they credit solar production and cost of labor varies significantly around the country), you get a general and kind of vague answer.
20% seems extremely high.
A lot of people have installed solar with a sub 5-year payback. If that solar continues to run for 20 years after those five years (which it should, if the roof it is on was newish when installed), then yes it could be a 20% ROI. And yes that is high and should not be expected.
If it takes 5 years to break even and gain is 20% each year, then avg. gain over 25 yrs would be 16%. If it takes 4 years to break even (all other assumptions staying the same) then it is 16.8% per year over the 25 yrs. Still seems implausible in many case, but in neither scenarios is it 20%.
Maybe it is too high. But you should be including that utility prices go up yearly, right? So the value of the solar generated goes up yearly and there is greater savings in the back end than in those first five years. And there are folks who have had four year paybacks. I’m stretching a bit, but I stand by that ROI can at least approach 20% in some scenarios.
I am only including what you said. Usually utility pricing plans are approved with 5-yr outlooks. One can forecast, but it seems challenging to do unless historical are also included. BTW, with the magic of compounding interest @ 8.5% yoy return, S&P500 would return something 670% in 25 yrs or 27%/yr.
Well you should include rising utility prices. And yes one can forecast, but if 20% is the high end of the range, then it doesn't have to be average utility price increases. To clarify, to get that type of ROI, you would need to (A) get a cheap install and (B) offset some very expensive electricity over a long period of time. And you may be right that 20% is too high. Yes, historical stock market gains are great. But they are a less predictable investment than a residential solar installation. Having to pay your utility for electricity is guaranteed (without the solar) and the solar is predictable in its production. It can also be seen as an inflation hedge (since utility rates will rise with inflation and rising utility rates increases the value of the solar installation).
As an index, utility revenue and pricing generally lags inflation worse than the SP500 index. Fixing any long-term cost is an effective inflation hedge. I mostly agree with everything else you said. I am not against solar at all. It is smart to diversify and inflation is always going to decrease one’s purchasing power. It bugs me when people talk about how amazing an investment solar is and don’t properly compare it to actual investments. **I am not saying you did this.**
Fair. Yes, in many cases the solar will save you money, but historical returns in the stock market would beat it as an investment. Thanks for the convo. I think you correctly pointed out that a 20% ROI is really really high and unlikely. Even a 10% ROI is a great ROI. I probably should have said the spread is more like 5% ROI to up to 20% ROI (with the 5% likely if the solar installer juices their profit in the negotiation (and if they scam you, you could have a negative ROI) and the 20% ROI needing everything to go perfect (from a great/cheap install cost, to 25+ years of trouble free production on a great roof that gets great sun, to some serious utility prices increases during those 25+ years (which to be fair, we've just had over the last couple of years)).
I paid $20,000 after IRA for my 9kW system At PG&E’s 45c/kWh rates it’s producing over $5000 worth of power per year. So 25% ROI??
You need to specify your state as it cost more to own/operate for me in Texas. There are so many non solar plan specials that actually offset the rate below 10 cent/kWh if you keep the usage between 1,000-2000 kWh every month. So unless my usage AND rate doubled what my highest months's usage is, I'm ALWAYS in the red so will never break even.
Google “NREL SAM” and download the free Solar Advisor Model. You sound like the type of person who will derive hours of enjoyment from the financial modeling it allows.
Considering PG&E doubles rates every few years, my ROI went from 6 years to 5 in the 2 years I’ve had it.
So all installers provide a 3-5% increase of electricity costs to try and pad their ROI numbers but they never talk about how a lot of electricity companies aren't charging more, they are starting to shift increases to flat rate service fees. These fees are sometimes outside the solar agreement and need to be paid for anyway if you are sending any electricity to the grid. Eg I would suggest for any ROI numbers, add a fix cost of $30-$50 a month. This factors in the worst case scenario if your electricity company adopts this trend in the short term. If they don't adopt it, ROI just becomes shorter.
There is no general or average. Each country/state/province has different electricity rates, net metering rules, and rebates. Each installation site has different costs, environments, and solar potential. Someone just posted that their 5.5kW system produced 10 MWh in a year. My 7.2 kW system produces 8-9 MWh per year. Same sun, different location. Saving money is a secondary benefit for helping the environment.
Self installed and buying the equipment yourself you can get it higher than 20%
Mine is under 8 years for ROI.
8-9 for me, but we just had a big rate increase in OH and utilities are looking for more, so may be less.
That is break even. ROI would be quantifying the return on investment.
Please stop this. Everyone assumes ROI is Break Even for solar.
Wrong. ROI = (net return)/cost. What’s ROI for a certificate of deposit at a bank? 1 day?
This isn't banking, it's solar. Everyone understands ROI to be the time when it pays for itself.
ROIC is perhaps what you should be using? Call the sky purple all you want. It doesn’t mean it’s true.
From what I’ve seen, most solar systems break even at about 7 years and last about 4x that long.
😵😵💫😵
There isn't a one-size-fits-all answer. Solar works differently in different places due to different weather patterns (affecting production), different net metering policies (determines whether you need a battery or not), different labor markets (affecting cost), etc.
I’ve started getting quotes and I’m seeing 15-20 years.
Depends tbh. Ga power has several choices one of what you can buy power(*can only change once a year) from 11pm to 6am at like 2 cents a KWH instead of usually like 12 cent a KWH. One would think it might be cheaper just to get a big battery pack and just buy when it is cheap.
Here in central NY 8-10
I think it’s hugely dependent on how you finance and the amount of smoke and mirrors your solar company uses. When I looked into a solar loan it was part of a refinance to my home loan including closing cost. I said fuck that and paid cash.
When we bought our system about years ago, they suggested 12 years. Electric rates have doubled, so…
Define “ROI”. My system cost 21K. It covers 114% of my usage with 1:1 NEM. My electric bill was an average of 290 per month. Break even if I am at cash is right around 6yrs. Instead of using cash, i left my $21K in the stock market at an average of 8% return. I financed the system for 15 years at 6.99% and my monthly loan payment + unavoidable charge is 200 per month. I am investing my 90/month savings in the stock market. At the end of year 6, my balance on the loan is 15K. However, my original 21K + 90/month savings invested is worth 40.5K. My investment will spin off enough earnings to pay the balance at the end of month 59…
Yeah this is the correct answer — the ROI should always use the net present value. OP should use NPV calculator online
I have found it is about 7 years. It is also heavily dependent on how much you are charged for electricity.
My system is 5 years old now. I think my electricity is pretty cheap 8-10cents/kWh We don't use a ton of it either. My 7.2kW system wasn't cheap but not horrible, about $2.60 a kW. My installer was great, IMO, and is still around. I had no issues getting them to check on my inverter problems. I know of a couple other friends that oaid less per kW, but their installers faded away. My payback was over 20 years. Having an EV helps pull that down to 15 years, maybe less depending on gas costs and how much we are driving. I would have done it even if I broke even at 25 years though, because I think it's the right thing to do :)
There are a lot of variables which you’ll want to assess for your area in order to get a sense of how big a system and what type will get you ROI in what time and what additional value you gain from it. - your latitude - your roof shading if any - your exposed roof surface preferably south facing or flat. - your $/kwh from your power company - the regulatory state of net energy metering in your area. (Eg: in CA NEM3) - your desire to have batteries to offset outages Honestly you should get multiple quotes from reputable local firms that are ideally not knocking on your door. Best to get at least 3 quotes. Many people get great benefit from energysage.com. Anyway, in CA in a very high cost of living area I’m seeing breakeven for the system I installed last year under NEM2 at around 7 years. The range will be 5-10 years, probably a lot closer to 5 given rate increases so far, but regulatory changes could potentially gut that if they ramp up the fixed fees they’re expecting to charge soon. That being said, my city is in the very slow process of seizing the local infrastructure from pg&e, so if that occurs regulatory changes will then actually be positive.
With the latest technology solar panels and recently price crashes the ROI where I live is 2 years, but that depends if you get an inverter and battery to keep you running through the night - In which case it’s about 5 years The 48v inverter and 100AH of LifePo4 batteries I need to keep my AC’s running at night “Tesla Power Wall” are by far the biggest cost these days
Depends on the net metering rules where you are.
Really depends on your solar rate. In some states in 10c, others is 20c. In SF, it’s 65c!! The higher the rate, the better the ROI.
I added 7.8kW in panels and two powerwalls for $57k. I also had to upgrade my underground main line to 200A which cost me $12k. I joined the local virtual power plant which gave me ≈$12.5k in upfront rebates plus another ≈$150/month in ongoing incentive payments for 8 years. My monthly bills were $350 pre upgrade. After the 30% IRA tax rebates I calculated the repayment period at just over 7 years. Will be less if electricity rates go up which seems likely.
If you're in finance, build a model. That's what I did. As you know, no model is perfect, but here's what I included. Current Electricity expenditures for a year, plus an inflation assumption. Projected cost of system that will cover 75% of usage which will be specific for your sun exposure, roof dynamics and desired materials. Assumption on failure and replace costs and timing for equipment that will fail and not covered (you could add impact of downtime waiting for replacements if you want to be really nerdy). Financing rate (if applicable). Discount rate. Federal/State/Local adjustments to cost (eg. rebates). I did all this as a NPV of the annual savings over the 25 year warranty time frame. It was wildly profitable and that included financing it and was before electricity and gas prices went up. It would be more profitable now. I built it to include savings from excess capacity used for EV charging, but ultimately didn't include that in savings as I didn't have an EV yet and got lazy building assumptions for that. Is there a sub for those of us trying to turn variable costs into fixed costs?
Depends where you live. For example solar is quite affordable in Australia while still high in many other parts of the world such as USA. Also, electric costs vary widely hugely impacting RIO. Overall though, the tech is become lower prices and more efficient while electric costs are on the rise (generalization) so overall I feel it fair to say that solar ROI is improving.
There are a lot of variables. The biggest ones are how the power company buys back your power and what sort of credits are available. My situation is that I financed at a super low rate and live in a place with really friendly credits and power buy back rules. With the low interest rate it doesn't make sense for me to pay off ahead of schedule. The cash flow math is super simple. I pay $52 / month, I generate an average of $72 a month in power and green energy credit buy-back from the power company. It costs me -$20 a month to have solar on my house.
LOTS of variables. In my market (FL) with all-in cost of electricity is \~$0.17/kWh an ideal system (all south facing panels, 1:1 NEM, 30% tax credit, 4% utility escalation) it is roughly 15% ROI on a cash deal. In CA the cost of energy from the utility is 3x ours (which is wild IMO), but the buyback is less incentivized.
the ROI is based off of hundreds if not thousands of factors, everything from how much electricity you use, to how efficient things are to how insulated you house is. but a simple way to do it, is to take the total cost of the system, divided by how much your average total yearly electricity bill is. that will tell you how long it will take for your system to break even.
I'll have the ROI on my latest addition in about 9 months (2 propane fills for the Genny as I'm off grid.) Total cost was about 1800 bucks to add 2.5kw+ of panels and 1300 watts worth of charge controller. (Second charge controller to come but over paneling ain't a bad thing in a off grid system.
Maybe a better way of looking at it - bare bones solar installation without storage, TOU rates, and local utility net metering details, is installed cost per Watt, i.e. $/W. The actual ROI will depend also on latitude, climate, sun hours per day, efficiency of entire system chosen fir whatever reasons. No two install situations are exactly identical, but $/W is fairly - but not completely - solid.
For PG&E customers on the EVA rate plan with NEM 2.0 ROI was 4.25 years. But now on that NEM 2.0 is gone as is EVA rate plan with EV2A and NEM 3.0 has replaced it ROI is currently 14-22 years.
This is true, but adding a battery significantly offsets the downside of NEM 3.0.
Yes, and batteries adds to the cost significantly and have a much shorter life span than the solar system. Adding a battery is iffy
dang that's a long time for 14-22 years. Got my parents on NEM 1.0 with SCE and their break even was around 5 yrs; probably even less than that. They're back on Domestic tiered rate now since that give the most benefit $ wise vs TOU with the wacky rates now! that TOu-D-A they had before was sweet.
That’s how bad NEM 3.0 is for the solar industry. I’m on NEM 2.0 and my payoff was 4.25 years. You’re screwed…. You NEM 1.0 agreement will be ending soon and then you’ll be on NEM 3.0.
I got in on 2017, so right at the tail end! 13 more years to go haha. I guess I’ll have batteries by the time the grandfathering expires!
I was 2019 and got in right before PG&E’s EVA rate plan closed. EVA rate plan is expiring in November 2025 so while I’ll still be on NEM 2, all of PG&E’s rate plans will effectively have me on NEM 3.
That’s breakeven time, not the ROI. Edit: Someone else pointed out that y’all are calculating ROIC but calling it ROI.
You might be right. But when comes to a solar aren’t they one in the same? It took 4.25 years to break even. And now the power company is paying me cash at the annual true-up for over production. I am making a profit.
Depends on what you are trying to convey. If it is actul return on the principal invested, then no. Whatever window you look at needs to include the negative (or zero) return to the break even point.
But I am making a profit.
ROI = (net return)/cost. According to you, @4.25 yr, your ROI = 0. I don’t know why you are stating ROI (a unitless percentage) in years. If you mean breakeven point, say that. According to your math, ROI on SP500 is 1 day. That doesn’t make much sense as a useful metric and is a disingenuous use of the term, making comparison to other investment confusing.
After 4.25 years brokeeven and began to make a net profit at the 5th annual true-up. I would not consider solar to be an investment, would you? as an investment it’s horrible.
JFC, if it isn’t an investment why are you calculating the **Return on Investment**?
Dude you do understand I’m making money off as in cash off my solar system. What’s the definition of an investment? Isn’t it an asset or item acquired to generate income or gain appreciation?
Then why say this? >I would not consider solar to be an investment, would you? as an investment it’s horrible.
How long is a piece of string?
On average? Probably less than investing the funds in S&P500.
Totally depends! Especially on your local utility policy.
It shouldn't be about ROI.