Solar Air Payback

The annual savings divided by the initial cost is the return on investment (ROI). This spreadsheet analysis uses a more sophisticated financial measure called internal rate of return (IRR), which is more accurate because it considers the time value of money and cash flow.

The Bottom Line

Given these conservative assumptions, installing a solar hot air system on a  house would yield about a 16 percent return on investment. If energy prices rise at an average of 15 percent annually, then it’s a great investment—resulting in a 24 percent IRR. Research published by the real estate industry’s Appraisal Institute indicates that for each dollar of operating costs saved annually, the value of the house goes up twenty times that. The first year savings in natural gas costs is estimated to be $279—in theory, a house would increase in value by $5,572. Simple payback would occur in Year 8. It would be a very good financial investment to be compared to other investments (most of which are not tax free). The long-term U.S. stock market (uninsured) average is about 8 percent annually. Certificates of deposit (insured) are running at about 4.6 percent. Besides the positive financial gains, there is projected intangible benefits—the pleasures of minimizing the use of the gas furnace, and feeling the solar-heated air coming through the vent. Last, but not least, it would lighten the environmental footprint, a satisfaction not measurable in dollars and cents.