Commercial | Savings (ROI, EVA, TCO)

 

On the Bright Side: Your Return on Investment

In today’s economy, businesses must allocate their limited available capital between competing investment alternatives. From a risk-adjusted ROI basis, a well-executed solar photovoltaic project can be one of the soundest financial investments any business can make.

 

Maximized Net Present Value

NPV is the definitive bottom-line measure of a solar project’s value proposition to your business; the net present value of all after-tax cash flows attributable to the project. Let us show you how solar can create value for your shareholders.

 

Improved Internal Rate of Return

IRR is the standard metric for capital budgeting analysis, and allows businesses to understand and compare the project’s annualized effective compounded return rate. Properly structured, a solar project can provide outstanding IRR’s in excess of your company’s weighted average cost of capital.

 

Economic Value Added (EVA)

EVA’s goal is to take into account the value created from the cost of capital invested a solar electric project after the completion of debt serving.  A solar electric project yielding an annual electric bill savings of $33,000 with an annual operating cost of $6,000 would have an EVA of $27,000 annually  Quite simply, EVA is the profit earned by the firm less the cost of financing the solar electric operations.  The idea is that value is created when the return on the firm’s economic capital employed is greater than the cost of that capital expense.

 

Total Cost of Ownership (TCO)

Total Cost of Ownership adds to the initial purchase price other costs expected to be incurred during the life of the product, such as service, repair, and insurance.  Yet, many property owners tend to overestimate the true cost of solar, according to a Harris interactive poll.  It illustrates that public perception still remains a major obstacle to adding renewable energy to the grid.  The online poll showed that property owners want to go solar, yet nearly eight out of ten respondents, of those who don’t already have solar panels, say they would install solar if cost were not factor.  But according to the survey, the perceived costs are wildly out of whack with the real expense of installing solar.

 

Rapid Payback Period

The payback period is simply the amount of time it takes for a project to earn back the initial unlevered investment. A solar project frequently provides rapid payback, which is particularly attractive given its long-term asset life.

 

Other Return Metrics

No matter which return metric your business uses to analyze capital investments, be it profitability index or modified payback, Green Power Systems will help you realize the financial benefits of producing your own clean energy.

 

Solar IRR Diagram
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