Payback Periods

The Solar King · Jan 8, 2014

Quick question, but maybe not an easy one.

Do you give a payback period and rate of return in the information and quotes you provide to potential customers?
Why do you or do you not do this?
If you do, on what basis is it calculated?

We currently do, based on a full Discounted Cash Flow (normally from PVSol). However I am wondering if our honesty and truthfulness is costing us business. Also, concepts of DCF and Yield are beyond quite a number of potential customers so may be leading to confusion.

Green · Jan 8, 2014

I leave it at a projected first year return based on savings and FITs. Simple enough for people to understand and I have no interest in pretending that I can accurately predict future rates (index linking, energy prices etc). If folk ask for a longer term prediction then we can do it, but make clear what assumptions have been made.

BruceB · Jan 9, 2014

I give payback and roi figures based on the fit at today's prices. As fit is inflated by rpi, it is effectively a npv figure already if using it in a dcf. This has been discussed before and there are others on the site who do more sophisticated calculations, building in electricity price rises at a certain % above inflation based on the decc forecasts, and even some who build in a rpi figure to the cashback calculation which values cash in 20 years times the same as cash today. I have always thought the latter a bit naughty.

Only some customers have any idea of npv, dcf and the like.

SRE · Jan 9, 2014

We quote 8% fuel price inflation and 2.5% interest on savings as a comparison, but we also only quote 30% savings in electric unless there's a clear indication they will use 50% or more, ie pond pump, massive energy bills etc.

Most of our customers don't want anything too financially technical because it confuses them, but what they do want to know is roughly whether it would be better to put their money in the bank or on the roof. As required we clearly identify the figures that we've used to make the calculations.

I don't fell naughty ;-) we don't do a hard sell, we're dead straight about how everything is calculated and we're getting repeat business and referrals from a huge % of our customer base so we must be doing something right.