Solar Panel Optimizer ROI Definitions Solar Panel Optimizer Sample Site
Discount rate: The definition of the discount rate is a critical component of the discounted cash flow calculation, an equation that determines how much a series of future cash flows is worth as a single lump sum value today. This calculation is a powerful tool for valuing your investment in a solar system. Cash flow in the future is not worth as much as it is today. An investment in a solar system ties up money which could be otherwise invested or saved. Think of it this way, if someone were to give you a dollar today, they might want two dollars back when they are repaid in ten years. The interest that money would command would depend on several factors, inflation, risk and alternative investments.
For example, I might feel that I can make a better return investing in the stock market, but I must understand that the risk is higher than if I were to invest in a savings account or treasury bonds, which carry a much lower interest rate. These factors combine to form the theoretical basis for the discount rate. A higher discount rate implies greater uncertainty, the lower the present value of our future cash flow. Selecting what discount rate to use in your discounted cash flow calculation depends on your personal risk tolerance and alternative investment choices. Remember that an investment in solar is a pretty safe bet. The sun will come out as planned and electric rates will probably go up, so perhaps we should compare the rate with similar safe investments. As of early 2017, the safest (no risk) of investments, long term treasury bills, are paying just less than 2.5% interest. Most people put the return on stock market funds at about 7% long term, however there is a risk of loss in any given year. The preselected (default) value here is 3%.
Panel output is shown here in Watts, as are the loads, which are shown shaded gray. As long as the panels are producing more power than the loads, the load power is coming from the panels, not the utility. There are usually more “spans” than months. A “span” occurs whever somethin of relevance happens to the solar production or rate schedule. A “span” occurs each month, since the billing cycle for electricity is usually monthly. A “span” also occurs whenever there is a change in the rate structure, although if the rate structure changes coincident with the beginning of the month, only a single “span” is generated. A span also occurs when Daylight Saving Time begins and ends, as these dates correspond to periods when the clock time and solar time change.
Solar Panel Optimizer Cash Flow Solar Panel Optimizer Sample Site Money is generated in one of four ways. The savings to the homeowner is equal to the power generated by the panels USED BY THE LOADS at the current rate. The second way money is generated is when the meter runs backward and
you can “net meter.” By selling the electricity back to the utility, the homeowner also makes some money. Both of these savings are used to calculate the return on investment, or ROI. While the utility may try to get you to move loads to the overnight hours, your return on investment may be better if you move those loads to a time when the panels produce excess power, as you may actually make MORE money from your panels as opposed to putting power back on the grid. The utility also makes money in two ways, first it sells you electricity whenever the panels don’t produce enough power, mostly at night when solar panels have no output. It also sells power whenever the panels do not produce enough to
exceed the loads. Your electric bill is equal to this amount less any money you may make by selling electricity back to the grid net metering. Second the utility sells the electricity that the panels put back on the grid at a markup. The markup on solar is equal to the current tariff rate less the net meter rate. in may cases this resale markup is quite good. For example, in the case of the sample site, the net meter rate is 5.96 cents/kWh but the tariff rate is 32 cents/kWh, for a net margin of 81%. This also means that if you do not have the load to use the panel production, you have constructed a high margin power generation facility for your local utility. The numbers here will tell you what this dollar amount is, but in some cases the utility will be making more money than the homeowner. This number means: DO NOT OVERSIZE YOUR SOLAR ARRAYS, as you are spending money (capital) for the benefit of a third party. Second, small solar arrays can provide an excellent return on investment because they reduce the effect of high Time-of-Use rates while minimizing capital investment.
Solar Panel Optimizer Batteries Solar Panel Optimizer Sample Site Batteries can store electricity that would otherwise go back to the utility through the meter. Because of low rates for “net metering,” you are better off storing the power in a battery and then using it when you need it. If fact, the use of a whole house battery may make the return on investment in the solar system increase, as you may use less electricity from the utility. You may find that your best return comes from makiing your arrays smaller, and relying on battery power more. This site does not currently calculate ROI for a system that combines solar array and batteries, but this feature will be added later. These charts will assist you in understanding ow the battery store and use power, and how much is needed, and can be stored, throughout the year.
Solar Panel Optimizer Array Summary Solar Panel Optimizer Sample Site