Something to think about when calculating ROI

Something to think about when calculating ROI

In my sales manual, I have a whole section devoted to Return on Investment (ROI) for SDHW systems. Basically, it shows the money saved by reducing energy use vs. the cost of the solar system minus the incentives. I have several charts that show the different conventional fuel type and how they compare with SDHW, when the payback will be, what a payment would be on a financed system, etc. Most clients eat this up as it is the nuts and bolts of any sales presentation.

One problem I have is predicting the future price of energy. For the purpose of the sales presentation, I use a standard 2.3 percent inflation figure. As everyone knows, energy has been rising at a much higher rate than that.

I read a very interesting article on The Oil Drum about the possible future prices of a barrel of oil. It does not look good. Grant it, these guys are the peak oil gloom and doom predictors, however, it must be said that everything they have predicted so far has come to pass more or less. Based on market pressures, their analyst is predicting $200.00 per barrel oil by 2010 and a steeper rise after that. This is supported by Goldman Sachs group which states:

The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,” the Goldman analysts wrote in the report dated May 5.

This is a chart from Oil Drum showing predicted prices for the next decade:

As goes the price of oil, so goes the price of electricity, propane, heating oil, natural gas, food and all the other energy sources. Of course, this is a difficult concept to convey to most people because they don’t understand how much our society depends on oil to function.

The current high gas prices at the pump are only a small inkling of what is in store for the next winter’s heating season. I have a feeling that a lot of people are going to have to make some tough choices next winter.

As always, it is difficult to tell what the future has in store for us. Without being too alarmist, I try to convey to the potential client that now is the best time to install one of these systems because as the price of energy goes up, so will the price of materials. A small sacrifice now may reap large rewards later on.

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