How we calculate investment return for solar
Basically, it boils down to costs and income. We plot those numbers on a graph for 25 years (the length of major panel manufacturer’s warranties), and do the math to find the payback time, Internal Rate of Return, and Net Present Value.For 2017, we added a new variable called panel degradation. Solar panels don’t last forever, but that warranty means the manufacturers guarantee their panels will continue to function at better that 80 of their rated production after 25 years. That’s a loss of about 0.7 of output per year. Some manufacturers now report better-than-expected degradation rates of less than 0.5, but until the lengths of those warranties increase, we’re sticking with 0.7.