The Bottom Line
January 2, 2009
Identifying the return on investment, payback and net present value of a renewable energy
systems is paramount as environmental awareness and financial prudence must go hand in hand.
The basic rate of return on any investment is based upon a comparison between the cash inflow
and outflow generated by the project and the initial cost to pursue the investment. With
renewable systems the cash inflow is generated by daily savings or excess energy sales and the
outflow (maintenance and operation) is minimal or absent altogether. Since the initial cost to
invest in a renewable system has been reduced by tax credits, rebates and loans with low APRs,
the resulting rate of return is comparable or significantly better than any other investment
made in new construction.
The net present value represents the dollar value added by assuming development of a project
under consideration. Assuming the system is sized correctly, by adding the discounted cash
flows for a renewable system over a fixed term the system value will always be positive, but
your consultant or installer will help improve the value greatly by conducting a thorough site
analysis.
For those considering a Leadership in Energy and Environmental Design (LEED) certification,
applying a renewable energy system is a significant part of the benefit. Leaving out a renewable
energy system and relying on a traditional – but perhaps better performing boiler – will marginally
reduce the footprint of the building being considered. The other areas of concern under LEEDs
certification require a change in mindset which may result in switching suppliers and materials or
replacing components. In the wider picture, this will cause a fundamental long-term shift away from
harmful products and toward renewable, recycled materials. However, the area in LEED design that has
the most impact and savings is under the Energy and Atmosphere category. By investing in an energy
consultant that can provide solutions at comparable cost to the original materials and long-term dollar
savings the resulting figures will result in a net gain.
Closing out pre-development of a project with a bottom line that reflects a gain by investing in
renewable systems is what to expect from a quality renewable energy solutions company.
