Misinformation is at home when looking at the financial calculations in almost any offer you will get, to such an extent that you shouldn’t trust any seller with it! One of the solar companies has a special section describing some of the tricks that can be played with numbers, but there are more. So I chose to do my own calculations, as described in a previous post.
Now I will compare the calculations for my 3kW system and then for a 10 kW system, the maximum allowable under the microFIT rules. I suspect that ROI is better for larger installations, because there are certain parts of the system which are only loosely correlated with the size: design, installation (to a certain degree), permits and even the inverter in some cases.
I will first consider the simple return calculation, corrected for a system cost of $7.8/W. You can download the simple return spreadsheet and check how it’s done. Remember, the simplified return doesn’t consider any of the operational costs (meter fee, insurance, etc) and neither the taxes. It’s an theoretical maximum return.
For the detailed return, I used the Switch Kingston spreadsheet with modified assumptions described in another post. Here are the results :
|Case||Investmentvalue [$]||After taxprofit [$]||ROI [%]||Profit/Investment ratio|
|3 kW, detailed||26842||15968||2.97||0.59|
|10 kW simple||88140||104340||5.92||1.18|
|10 kW detailed||
The first thing to notice is the obvious limitation of the simplified model. Both the 3kW and 10kW systems have the same ROI, 5.92%! However, when using the more realistic detailed model, the ROI is 8% better for the larger one. That is what we expected and it makes a lot of sense.
But what’s really important in the above table is how large is the gap between the results of the two models in the case of a small system. My 3kW panels will return only 2.95%, basically only 1% more than inflation. Even the 10kW system will be only at 3.2%. This compares as almost equal or lower than some government bonds or long-term GICs. While I readily admit that the latter are not tax-free, they can potentially become so if they’re held in a TFSA tax-free account. Solar panels can not.
Update: proving once more that you shouldn’t trust anyone with your own financial calculations, I have to confess that I somehow managed to mess the numbers on the 10kW detailed calculation in the above table. The after tax profit is $56663 (not $75359 as previously stated), so the ROI is 3.20% instead of 4.26%. The table is now updated.