Return on investment *UPDATE*

We decided to update our Return on Investment spreadsheet to make it work a bit better for Solar PV investments.

We’ve been getting a lot of feedback on the Return Calculation sheet we posted a few weeks ago. A lot of people were using it to calculate their return on investment on Solar Photovoltaics. We’ve updated the whole spreadsheet to better reflect the kind of Solar-PV system you can buy off the shelf.

We’ve based in the initial numbers on a Grid Tied Solar System – a bit like these.

As you can see in those examples, the panels are likely to work for 20+ years, whereas the inverter is only guaranteed for 5. As such, you might need to replace the inverter every 5 years. The old returns calculation sheet couldn’t do that very well — the only thing you could do was put in a monthly maintenance charge. We’ve added in the functionality to have an irregular ‘replacement’ cost — so if you do have to replace the inverter every 5 years, that’s figured in the calculation.

Here’s a quick list of the updates to the way the calculation works.

1. Many solar and other projects have irregular ‘replacements’ that need to be added to the system — be that inverters, batteries, etc. It is incorrect to model these as ‘monthly’ maintenance, because they aren’t regular monthly payments, instead they are once-off costs, but in the future.

2. We had to change the way inflation works — there is a different inflation for the ELECTRICITY saving, and the maintenance and the replacement costs

3. We had to change the way the Rate of Return calculation works. This is just because Excel’s IRR() function doesn’t work well when there are cash flows going both ways. Instead we have to use the XIRR() one, which needs dates to work… thus the date down the side now.

Anyway, when we use this sheet it tells us that those Grid Tied systems (with a R10,000 installation cost) would give us 22.3% return. That’s quite a bit better than the bank isn’t it!

Enjoy and let us know what else you need to figure out. At Homebug we do all the hard-work, so you can make the best decisions for you, your house and your family!

(BTW – you have to be very careful when thinking about ‘inflation’ over 10+ years – just look at the figures at the bottom of the sheet R1,243 turns into R44,338 after 30 years of 12.7% inflation… ouch!! But then 30 years is a long time and prices always rise inexorably. How much was a Spur Burger in 1985?)