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How to Calculate Internal Rate of Return (IRR)
Learn about calculating Internal Rate of Return (IRR) when implementing clean, green solar technologies into your business or organizational assets. |
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Calculating Internal Rate of Return (IRR) of Solar Energy Equipment |
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| Solar pool heating system costs range from $1,500 to $9,000. The location and size of the pool, location of the solar panels, desired temperature and season, and type of pool equipment determine system size and costs. Because of the variables of state & federal incentive programs, giving an accurate estimate is extremely complex. The solar However; once your solar pool heater is installed, there are no operating costs - the sun's rays are free! | ||||
Conventional Electrical Cost |
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The main factor is the per-kWh price that most companies pay for electricity. Sky- rocketing utility costs make a perfect case for solar energy systems. Solar energy enables companies and private homes to avoid exuberant charges for electricity.
Examine a basic example: Company 1 and company 2 both use 10,000 kWh a month, usually company 1 pays 6 cents/kWh while company 2 pays 12 cents/kWh. They install identical PV solar systems which cut their electricity purchases in half. Company 2 has made a more lucrative investment for their monthly savings- $600 while company 1’s savings is only $300. IRR calculate these savings as positive cash flow.
Industrial customers usually pay less money for electricity than commercial and residential customers. In 1999 the industrial sector paid approximately 4.4 cents per kWh as residential and commercial customers paid 7.3 cents/kWh and 8.2 cents/kWh. Larger electricity costs are usually aligned with faster pay-back periods and traditionally higher internal rates of return. |
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Price Inflation |
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The per-kWh that any given company pays for electricity is the fundamental key to success. As prices from utility companies rise, your company will stand to benefit from a solar energy system. Solar energy will eventually be the termination of fossil fuel.
Imagine a similar situation--company 1 and company 2 both use 10,000 kWh a month. Routinely company 1 pays 6 cents/kWh while company 2 pay 12 cents/kWh. If both companies install the same PV solar system, company 2 will save $600 a month while company 1 only saves $300 a month. Company 2 has made a better investment.
Industrial customers on average pay less than commercial and residential customers. In 1999 the industrial sector around 4.4 cents per kWh, whereas commercial customers paid 7.3 per kWh and residential customers paid 8.2 per kWh.
The ultimate success of your solar-energy system will be affected by the rate in which utility companies increase their charges. U.S. utility prices have increased at a yearly rate of 2.5% since the year 2000. Prices for electricity have been rising much faster than prices in the general economy. A solar-energy system has the usual life-span of 25 years which make them an effective way of controlling your company’s price inflation for at two decades. |
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Solar Panel System Maintenance |
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Solar panels will require maintenance at times, however, solar equipment is relatively sturdy and the costs are reasonably limited. Except under the condition that your system uses electronic servos to track the sun, solar PV systems have no moving parts. At some point your system will also need a replacement inverter, but, it is estimated, not until year 15 of your system’s projected life. |
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