Solaflect Community Solar Park outpaces top muni bond fund

According to US News & World Report, the #1 long-term, national municipal bond fund has—over the past ten years—returned an an annual rate of 4.8%. This is the longest time span that US News reports.

Our estimate for the Internal Rate of Return on a Solaflect PV Tracker hosted at our Community Solar Park is 5.0%, over 20 years. The reason we show a comparison with a municipal bond fund is because that sort of investment is non-taxable, and solar net metering provides non-taxable value to residential electricity customers: net metering reduces your cost of living, freeing up your money for other things, but does not provide cash income which would be taxable.

A key assumption in this estimate is that electricity rates with Green Mountain Power will rise at an average annual rate of 2.65%. We use this assumption because that has been the average annual increase in residential electric costs in Vermont over the past 25 years. If rates rise more quickly in the future, then the return on a Tracker increases because it is saving you more than had been assumed.

US News - best long-term national municipal bond fund 2015-09-28b
This screen grab, taken on September 28, 2015, shows US News & World Report’s listing of the #1 long-term, national municipal bond fund. This fund has had an annual return of 4.8% over the past 10 years, less than the expected return from a Tracker at the Community Solar Park. Click on the image to see it shown larger.

Be aware that many solar companies describe the expected Return on Investment (ROI), whereas the estimate above is for the Internal Rate of Return (IRR). These are calculated in different ways and cannot be compared. The IRR is a superior measure of expected performance, because it takes into account the difference between value received in the short term and value received in the long term. Additionally, it gives you a result that can be compared to traditional investment features, such as the interest rate on a CD or money market account. The ROI is much more rudimentary, does not allow for the difference between near term and long term, and cannot be compared to any of those other measurements.

Comments for this post are closed.