Deep-dive guide
Factory Rooftop Solar and I-REC Offset Simulator: Own Power Versus the Grid Bill
Executive industry analysis
A rooftop plant looks like a simple trade: spend money once, stop paying the grid for part of your power. For a factory the trade is more subtle. The roof produces only in daylight, the factory consumes on its own schedule, and every kilowatt-hour that is not used on site is sold at a fraction of the tariff. At the same time the plant is paid for with a ten-year loan that does not care how sunny the year was. The decision is therefore a question of how much of the output replaces expensive grid power, not how many panels fit.
Renewable energy certificates add a second stream. A certificate such as an I-REC is issued for each megawatt-hour generated and can be sold or retained to support a customer's renewable claim, so it turns a share of the plant's output into documented value. The income is usually small next to the tariff saving, but for exporters facing buyer sustainability requirements it can matter more than its price suggests. Rules for certificates differ by country and buyer, so check current requirements before relying on them.
The domino model follows the money in order. Sun yield sets generation, the on-site share decides how much of that generation replaces the grid bill, the saving and certificate income are set against the loan, and the cover ratio shows whether the plant pays for itself. A weak link early on, for example a low on-site share, weakens everything downstream, while a loan rate that looks small can be the reason the last box turns red.
The iceberg shows what a brochure leaves out. Above the waterline sit the loan principal and the maintenance contract. Below it sit the interest on the loan, the reserve needed to replace inverters during the plant's life, the savings lost as panels age, and the discount at which surplus power is sold. None of these appears in a payback slogan, yet together they decide whether the monthly cash result is a profit or a quiet loss.
Formula and methodology blueprint
The model uses a 500 kW plant financed fully by a ten-year loan and averages the month over those ten years. Production is installed kW times yield divided by twelve, reduced for average panel ageing. The on-site share replaces grid power at the tariff, grown by a modest yearly tariff increase. The rest is exported at about 35 percent of the tariff. Certificates are paid per MWh generated. The burden is the loan payment plus maintenance and an inverter reserve.
- Monthly generation
- E = kW × yield ÷ 12 × (1 − 0.5%)^4.5
- Average kilowatt-hours per month over ten years, allowing for panel ageing.
- Grid saving
- S = E × on-site share × tariff × tariff growth factor
- The grid bill avoided on the power the plant uses itself.
- Other income
- X = E × (1 − share) × tariff × 35% × growth + E ÷ 1000 × I-REC price
- Export income plus certificate income.
- Loan payment
- P = cost × r ÷ (1 − (1 + r)^−120)
- The level monthly payment on the whole installed cost.
- Net result
- Net = S + X − P − maintenance − inverter reserve
- The average monthly profit; the breaking point is where it reaches zero.
- Loan cover
- Cover = (S + X) ÷ (P + maintenance + reserve)
- Above one, the plant pays for itself each month.
Cascading elasticity
Installed cost and the loan rate act together because the loan payment is the largest line, so a ten percent cost cut and a two point rate cut are worth similar amounts. The grid tariff and the on-site share multiply the same energy, so they are the steepest levers on the income side. Yield matters as much as the tariff, while certificate income is the gentlest lever unless the market price is high.
Three real-world case studies
Bootstrapped starter
A first plant on a modest tariff
A small manufacturer installs the plant on a roof with good sun but pays a medium tariff and borrows at a normal rate. Most output is used inside the factory, so the plant just covers its loan and leaves a small margin. Loading it shows how thin the month is when the saving only slightly exceeds the loan payment.
Scaling mid-market
A sunny site with cheap installation
A factory in a high-sun region gets a low installed price, runs heavy daytime loads and borrows on a green loan. Almost everything is consumed on site and certificate income adds a little. Loading it shows how the same plant becomes far more profitable when sun, cost and load line up.
Black-swan crisis
Cheap grid power and an expensive loan
A plant is built at a high installed price on a shaded roof, the grid tariff falls and the factory uses less than half of the output on site while the loan rate is high. The saving shrinks and the payment does not. Loading it shows which input can rescue the month first.
Industry benchmark matrix
| Metric | Danger zone | Industry average | Top 10% elite |
|---|---|---|---|
| Annual yield per installed kW | Below 1,000 kWh | 1,200–1,500 kWh | Above 1,700 kWh |
| Share of output used on site | Below 50% | 65–85% | Above 90% |
| Loan cover (savings ÷ burden) | Below 1.0 | 1.1–1.4 | Above 1.6 |
| Installed cost versus local market price | Above +25% | Within ±10% | Below −10% |
| Certificate income as share of total savings | Counted as the main case | 1–4% | Upside only |
Variables and levers
Installed cost per kW
Total turnkey price of the plant per kilowatt peak, including panels, inverters, mounting, grid connection and permits.
Lever: Collect several bids on the same specification and check that the price includes grid connection, structural checks and monitoring.
Annual yield per kW
Kilowatt-hours produced per installed kW in a normal year, which depends on location, tilt and shading.
Lever: Commission a shading and roof-orientation study before signing, and ask for a performance guarantee on annual output.
Grid tariff per kWh
What the plant pays for a kilowatt-hour from the grid in daytime hours, which is the price each self-used kWh avoids.
Lever: Check your actual daytime tariff and any demand charges, because the savings rest on the price of the kilowatt-hours you really avoid.
Share used on site
Part of the solar output consumed by the plant itself; the rest is exported at a lower price.
Lever: Move heavy loads such as compressors and furnaces into daylight hours, or size the plant down so almost everything is used on site.
I-REC price per MWh
Value of the renewable certificate issued for each megawatt-hour generated, either sold or kept to avoid buying certificates.
Lever: Register the plant early, compare certificate buyers and decide whether to sell the certificates or keep them to cover your own claims.
Loan interest rate
Yearly interest on the ten-year loan that finances the plant.
Lever: Compare green-loan and leasing offers, since a few points of interest on a ten-year loan can cost more than the panels' price cut.
How to use this simulator
- 1Enter the quoted installed cost per kW and the yield from a site study.
- 2Set the daytime grid tariff and the share of output your factory can use on site.
- 3Add the certificate price you expect and the interest rate on the loan.
- 4Read the five domino boxes and press Find my breaking point to see what erases the profit.
- 5Compare with the load-shifting plan in the Parallel universe tab over 24 months.
Mistakes to avoid
- Using the average grid price instead of the daytime price you really avoid. Savings should be priced on the kilowatt-hours the plant replaces.
- Assuming all output is used on site. Weekends, holidays and shutdowns send power to the grid at a low price.
- Leaving out the inverter and maintenance. A payback that ignores them looks better than reality.
- Counting certificate income as the reason to build. It is a bonus whose price and rules can change, not a foundation.
Frequently asked questions
What is an I-REC?
It is a renewable energy attribute certificate issued per megawatt-hour of generation. Companies use certificates to support claims about renewable electricity, but the rules differ by market, so check current requirements and the buyer's standards.
Should I sell the certificates or keep them?
That depends on whether you or your customers need the renewable claim. If you sell them, you generally cannot also claim the green power. The simulator counts them as value either way.
Why is exported power worth so little?
Many grids pay a wholesale-type price for surplus, far below the tariff you avoid when you use the power yourself. The model assumes about 35 percent of the tariff, so check your own export terms.
Why include inverter replacement?
Inverters usually wear out before panels. Setting a reserve aside each month avoids a surprise bill in a later year and keeps the monthly result honest.
How do I find the breaking point?
Press Find my breaking point. The tool moves each input towards its worse end and reports the value at which monthly profit reaches zero, ranked by how close each is.
How accurate is this?
It is an educational model with simple, stated assumptions, not engineering, tax or financial advice. Get a site-specific yield study and a written quote, and check incentives and certificate rules in your country.
This is an educational planning model with stated assumptions. It is not financial, tax or legal advice. Replace the inputs with your own figures and verify important decisions with a qualified professional.