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Solar ROI Analysis for Hotels

The document provides an economic analysis of a proposed 50.82 kW solar electric system. It estimates that the system will generate over 1.2 million kWh of electricity over 25 years, saving the customer over $148,000 in utility costs. The analysis finds that the system would pay for itself in around 11-12 years due to expected annual utility rate increases of 3%, and provide an estimated return on investment of 34.2%. It also compares the projected returns of the solar system favorably to other lower-yield investment options when risk is considered.

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Tarik Ahasan
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174 views5 pages

Solar ROI Analysis for Hotels

The document provides an economic analysis of a proposed 50.82 kW solar electric system. It estimates that the system will generate over 1.2 million kWh of electricity over 25 years, saving the customer over $148,000 in utility costs. The analysis finds that the system would pay for itself in around 11-12 years due to expected annual utility rate increases of 3%, and provide an estimated return on investment of 34.2%. It also compares the projected returns of the solar system favorably to other lower-yield investment options when risk is considered.

Uploaded by

Tarik Ahasan
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Calculating ROI
  • Sample Solar Economics Summary
  • Payback Considerations
  • Project Cost and Savings
  • Investment Comparisons

Solar Economics

Calculating ROI

Slides by Gay Canough


Solar Economics
Sample Solar Economics Summary

A Solar Electric System with: It generates about 53898 kWh in year 1, PVWATTS
(132) Trina 385 W PV modules (50.82 kW) And 1,269,618.67 kWh in 25 years
Roof-mount
SMA TriPower 3-phase inverter TOTAL JOB COST $138,053.00
All wiring
NYSERDA grant $22,869.00
Complete installation After-NYSERDA cost $115,184.00
Estimated Fed tax credit $29,947.84
MACRS* $34,513.25
Fixed-Cost per kWh of PV for next 25 years: End cost $50,722.91
4.0 cents
(PV life expectancy is 40 years)
PV Modules have a 25 year warranty. Inverters have a 20 year
warranty.

What this customer will have paid utility over 30 *MACRS is accelerated depreciation and stands for “Modified
Accelerated Cost Recovery System”
years if they don’t go solar: $148,504.82 This is taken over 5 years. Ask your accountant or visit
[Link] for details.
It works out to 25 to 30% of the Total Job Cost.
Solar Economics

3% “Simple Payback” is irrelevant to


Consider utility increase running total of
rate increases in kWh
What PV saves
savings
PV systems, because utility rates
cost always go up over time.
year 1 $0.065 $3,503.37
year 2 $0.067 $3,583.21 $7,086.58
year 3 $0.069 $3,664.87 $10,751.46
year 4 $0.071 $3,748.40 $14,499.85
year 5 $0.073 $3,833.82 $18,333.67
year 6 $0.075 $3,921.19 $22,254.87
year 7 $0.078 $4,010.56 $26,265.43
year 8 $0.080 $4,101.96 $30,367.38
year 9 $0.082 $4,195.44 $34,562.83
year 10 $0.085 $4,291.06 $38,853.88 Assumption of 3% average rate
year 11 $0.087 $4,388.85 $43,242.73
year 12 $0.090 $4,488.87 $47,731.61
increase leads to 11 to 12 year
year 13 $0.093 $4,591.17 $52,322.78 time for system to pay for itself in
year 14 $0.095 $4,695.81 $57,018.58 electricity savings, even when
year 15 $0.098 $4,802.82 $61,821.41 the rate started fairly low.

If the rate is 10 cents, the time


goes to 8 to 9 years.
Solar Economics

Cost of project without grants or tax credit $27,000


minus ‐ Incentive ($.30/watt)1 $1,800
minus ‐ Federal Energy Income Tax Credit (.3*$27,000) $8,100
minus ‐ New York Income Tax Credit (available for residential only) $0
=Actual Installed Cost [1‐2‐3‐4] $17,100

6. Annual Savings/Income
Energy Savings (7,534kWh@$.14/kWh) $1,055
Other Savings (lost employee work) 4 x $1,200 = $4,800
Income (RECs) (7,534kWh@$.00 kWh) $0

Total Savings = $5,855

7. Savings pays for system in $17,100/$5,855 = 2.9 years even with no rate increases considered
8. Return on Investment(1/7 x 100) (1/2.4) x 100 = 34.2%
(1) Assumed incentive level

This simplified approach neglects changes in energy rates, interest, and depreciation.
Solar Economics

Comparison against other investment options.

1) Certificates of Deposit: ~1‐3%

2) Stock Market: historically ~9‐10%

3) Savings Account: ~0.5%

4) Treasuries ~3%

5) Corporate Bonds ~2‐5%, risk of loss of basis

When the concept of risk is added to the analysis, which


investments do you think have the highest risk, those above or
solar electric?

Solar Economics Calculating ROI Slides by Gay Canough
Solar Economics Sample Solar Economics Summary A Solar Electric System with: (132) Trina 385 W PV modules (50.82 kW) Roof-mou
Solar Economics Consider utility rate increases 3% increase in kWh cost What PV saves running total of savings year 1 $0.
Solar Economics Cost of project without grants or tax credit minus ‐ Incentive ($.30/watt)1 minus ‐ Federal Energy Income T
Solar Economics Comparison against other investment options. 1) Certificates of Deposit: ~1‐3% 2) Stock Market: historically

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