ROI is one of the most important aspects of determining if the solar lighting project you are looking to complete is better than going with standard electric lighting. This can be one of the most difficult things to determine, but there is a little information that can help you determine what the return of investment of the project will be. Here are some simple steps to help you find out what your payback period will be and the ROI of your project.
1. Determine the total cost of the project, including the purchasing of the solar lighting systems, the installation costs and other associated fees that may occur. Also, make sure to look into finding out what incentives are available on the Federal, State and Local governments.
2. Determine the total cost of the project, including the purchase and installation of a standard electrical lighting system would be including the trenching and all wiring requirements.
3. Also, find out what the current electrical rates would be for your project and don’t forget to include inflation over time. Since a solar lighting system has a life span of over 20 years, you can easily determine what your utility bill will be over the next 20 years and add that to your installation costs.
Say the area requiring lighting calls for 5 lights. If your solar lighting project is a total of $19,000 and bringing in electric for standard lighting is $10250 for example, you would need the following formula to determine the ROI:
Solar: $19000 Equipment – 30% Federal Tax Incentive = $13300 + $750 Installation = $14050 + $2250 Maintenance = $16300 total cost of project over 25 Years (remember, no electrical costs ever).
Electric: $13750 Equipment and Grid Extensions / Wiring / Trenching + $750 Installation = $14500 + $10060 Electricity Costs (3% Inflation over 25 Years) = $24560 + $835 Maintenance = $25395 total cost of project over 25 Years.
Now to determine the ROI of the project: The initial investment of $14050 vs $14500 for the purchase of the systems and the installation shows a difference of $450. The average electrical cost per year is $276 in the beginning and would give the system a 2 year ROI. This is with the average electrical costs; these vary in different areas in the country and can be longer or shorter depending on the local costs. This formula is also under the assumption that electric is available nearby and there isn’t much for electrical installation to occur. With so many vitiating factors, including other incentives that can reduce your solar lighting costs, speaking to your lighting specialist can help determine the exact ROI of your project.
Remember, there are always multiple factors that can change the return on investment on your project, but knowing all the costs going each direction will help you determine what the best is for your money. If that doesn’t work, just remember, you are lighting up your world with free solar energy and providing a green option to your project.
*NOTE: The above example is just that, an example. Contact your lighting representative for your project costs and information.