After a long hiatus, we’re pleased to reintroduce our regular SAGE Advice articles. To anyone formerly interested in listening to us I offer my apologies for the break.

ROI or Return On Investment

I love debating ‘Return on Investment’ (ROI). Many folks interested in renewable energy often ask this question first about a potential system for their home or business. While this is certainly a valid concern there is an “apples vs oranges” aspect.

Most ROI calculations use a number of factors, including the current rate of electricity, potential inflation, and life of the equipment. Calculations using industry standards such as RETScreen or other equivalent software take in a number of additional factors as well (equipment efficiency, average solar insolation for a geographic area, etc).

The reason for a debate

ROIThe ROI debate stems from the fact that there is a focus on ‘things’ in the world having a financial weight that must be justified by a consumer over a period of time. Sometimes, however, that evaluation is not fairly considered across all ‘things’. For example: an automobile, furniture, appliances, tools or a multitude of others.

ROI gets quickly weighed against financial investments, unfairly weighed (or ignored) against a credit card debt and seems to take a hold on items that are apples when compared to oranges (and sometimes lemons).

When it comes to electricity there are only two choices: produce or consume.

Let’s take a solar electric system for example:

Considering the historical annual rise in electricity rates of 6% (average) would this not be a fair ROI evaluation on something producing your electricity? How does that compare to your fossil fuel burning furnace? Bearing in mind that historical data may not reflect any future trends…

You could also take into account the other notable benefits of investing in your own solar-electric generation equipment, such as the environment, property value, product longevity and self satisfaction.

For example: solar module warrantyinhousechargingstation

  • The industry standard warranty on the power production of a solar module in today’s market is 25 years.
  • With degradation, the module is warranted to produce 80% of its original rating at the end of 25 years. If a manufacturer is willing to cover that much production under warranty, it seems reasonable to think the actual degradation would be significantly less. 
  • At the end of those 25 years, the equipment will not suddenly stop producing electricity; it will be reduced (a good ROI calculation will take into account the degradation of the equipment) but it will still be producing energy.

It is very unfortunate and true that there currently are no financial incentives available from the governments of Atlantic Canada for solar electricity, but there also aren’t any (or very little) other residential home investments.

Electricity is a commodity, however increased demand will not create a cheaper supply because the demand will necessitate more generating facilities, more management and more transmission lines. All of which will be reflected in the overall cost of electricity.

Investing in electricity is a necessity in today’s world. Where your electricity money travels is a consideration for you to determine.

…Alternatively, your money can always invest in Thneeds. [image src=”” align=”center” border=”image_border” link=”” alt=”The Lorax – Thneeds” title=”The Lorax – Thneeds” lightbox=”false” ]