I'd say if you are trying to make it simple, drop the inflation. Even
cash has a future value due to investment opportunities. Otherwise you
would be looking at adding 6% interest or better to fund the purchase
price, and adding "inflation to the electricity" only looks like you are
trying to accelerate the pay back. As long as you give the customer all
the info, that's a good thing. I just get really annoyed with the
"glowing future" type sales promotions that get put together for the
"green projects" that aren't financially sound, but rely on "enthusiasm"
to carry it it past the point of no return. I apologize if I sound a bit
harsh, but I've watched a lot of "energy saving products" fail to live
up to the expectations they were built up to be. A quality product that
can pay itself back before the warranty expires is a great asset, and
"Under promise, but over deliver" will take care of the long term business.

May your business be successful!

Eric wrote:

Bob I,

What would I need to take into account so that this is realistic? Isn't the
fact that we take the customers most recent years worth of bills and apply
inflation good enough? The Solar Electric system is paid for upfront by the
customer if it's cash otherwise if it's financed we again take into account
the interest on the loan. This seems logical because inflation will apply
regardless of the loan amount or continued utility bills. Solar is the
difference between buying a house and renting one. Inflation will apply
either way.
The 4% is an inflation number I just threw out there, actually studding the
last 25 years here in CA inflation from Utility providers is almost 7% over
each previous year. With such high cost of utility supplied electricity,
Solar here in CA, is a fast growing industry. Germany and Japan are way ahead
of the US in number of installed systems. This is not some 1980 scheme! It
works because solid technology, attractive design and we have 25 year product
performance based warranties from some of the biggest businesses in the
world, BP, Mitsubishi, Sharp, SunPower, etc.. It also works because CA state
pays nearly 1/3 the cost in way of rebates for home owners. For business not
only do they pay rebates but with accelerated depreciation most business pay
only 1/3 of the initial cost. I was hoping to learn here, and I hope we both
have. If you live in CA or NJ you should check out solar, while it's not
economical for those with very little electric usage, it can save you
thousands, provided needed green energy with localized distribution. 99% of
our customers are stilled tied to the utility (you must be tied to the
utility to receive rebates) so they experience no lifestyle changes. The
utility agrees to bill our customers once yearly and buys back the extra
power they produce. This allows our customers to make extra power in the
summer, sell it to the utility (for credits) and then buy it back in the
winter.

Eric




Like Fred said the formula is simply the NPER financial function. BUT
that use in this case is a piece of fiction. That assumes that money is
free, there will be no increase in the house insurance, no increase in
the apraisal of the property and taxes, that the electric company will
waive the customer or meter charges. Now given how all that has been
ignored, I would not be inclined to believe that the "system" would
provide all the electricity either. Actually this reminds me a lot of
all the schemes that popped up around 1980!