The ROI Of Solar Energy Systems

Many people are interested in the Return Of Investment in photovoltaic systems. Here I will post some useful comments for both large scale product as well as solar energy solutions for a single family home.

Mary Cunnyngham, CID, Renewable Energy & Energy Efficiency Consultant at Renewable Concepts & Design

When most people talk about Solar Energy they think of Photovoltaic (PV), which generates electricity. However, the most cost effective solar solution is Solar Thermal – heating water and space heating. In hot water intensive markets, Solar Thermal has a long-term proven track record. Australia, Israel, India and many other countries have a huge lead in this market.

When paired with the most efficient hot water storage tanks, evacuated tube technology can be the best, in our experience.

Nir Ben-Dov,It’s all about BizDev, Sales and Marketing in the USA, APAC & Israel

Mary, You are correct, when talking about solar for energy – most people think of PV and that was my interest. From what I have seen thus far the real ROI is 10+ years unless you do very creative accounting so I wanted to find out what the real numbers are in different countries, taking into account the feed-in tariffs..

I live in Israel and you are right again, solar water heating is very big here for several reasons, by law ALL new construction has to have solar water heaters and because the cost of the heaters is quite low – the ROI is in the range of 2 years which makes the solution all the more viable.

Solar water heaters are extremely affordable and the market is very competitive – for all intents and purposes it’s a commodity these days – at least here in Israel. It’s not a market you want to enter into – but PV is of interest once the ROI becomes reasonable.

Mary Cunnyngham, CID, Renewable Energy & Energy Efficiency Consultant at Renewable Concepts & Design

Of course you knew all this! I apologize for making a false assumption..

Currently in the US, of course, there is no national feed-in-tariff, however several states or communities are using a similar mechanism (i.e. Gainesville, Florida). There is some movement at the federal level on this, but in my opinion we are still several years from implementing such a progressive policy (and perhaps too late.) Another "carrot" in the US is the tradeable Renewable Energy Credits (RECs). As more states (and eventually the nation) institute Renewable Portfolio Standards (known by many names), utility companies are paying prime $ for future green energy. This will intensify further when there is a Cap and Trade program for carbon credits.

At the commercial level the incentives for installing solar are quite attractive, especially now that the "tax credit" can actually be taken directly as a grant. Creative financing and Power Purchase Agreements are quite successful in the commercial market, especially on the East or West Coasts. SunEdison is the giant in this as was the recently bought MMA Renewable Ventures.

At the residential level – here in the midwest our installers are seeing $8 – $10 per watt installed for PV, although some are willing to go to $7.50 – this still leaves a ROI of 20 – 25 years. With utility rates recently increasing by 24% or more, the ROI may shrink considerably. There are a couple promising ventures in the residential market (SunRun and Solar City) which are renting the equipment. This seems to be a future trend that, once proven successful after a few years, will spread.

If you are looking to also manufacture PV panels or any BOS component, this may be a great time to enter the market in the US. With the recent federal infusion of $$, the expedition of business loans and easily convertible factory buildings sitting idle – you would have a wonderful opportunity.