Your goal is to perform a feasibility study on solar panels installations in Nova Scotia in 2019, when Efficiency Nova Scotia offered maximum rebates - up to $10,000. By 2020, Efficiency NS lowered maximum rebate to $6,000.

Exhibit 1 highlights some details on a prospective solar panels installation in a townhouse in Wolfville, NS.

Exhibit 1: solar panels production and costs

estimated annual production, kWh

8,770

cost, CAD

26,750

HST at 15%

4,013

total, CAD

30,763

rebate

8,775

two-way meter, NS Power

300

net cost, CAD

22,288

Utility rates are expected to go up: in December 2019, the Nova Scotia Utility and Review Board (UARB) approved Nova Scotia Power's three-year fuel stability plan. In 2020, 2021 and 2022, residential electricity rates will increase an average of 1.2% each year. Price per kWh was around $0.15603 in 2019. Fixed charge was $10.83 per month. All numbers are pre-tax.

Exhibit 2 lists bi-monthly power consumption by the house in 2018-2019:

Exhibit 2: bi-monthly power consumption

energy used

kWh

Feb - Mar

4,840

Apr - May

2,770

Jun - Jul

1,978

Aug - Sep

629

Oct - Nov

1,769

Dec - Jan

4,179

Total

16,165

Efficiency Nova Scotia limits rebates by constraining installation size - projected power generation should not exceed power consumption. In this case, Efficiency NS got it wrong - the system is installed on the southern slope of the roof in Wolfville, which gets more sunshine than an average community in NS, and it is more efficient. Actual monthly output numbers are listed in Exhibit 3:

Exhibit 3: actual output

Month

kWh

Nov 2019

467

Dec 2019

345

Jan 2020

286

Feb 2020

713

Mar 2020

942

Apr 2020

1,278

May 2020

1,427

Jun 2020

1,362

Jul 2020

1,329

Aug 2020

1,481

Sep 2020

1,172

Oct 2020

851

total

11,651

You need to perform your analysis under two scenarios:

Scenario 1 (S1): the system remains in place in perpetuity, you are getting a rebate of $8,775. Assume actual output.

Scenario 2 (S2): the system remains in place for 25 years, and you are getting a rebate of 6,000. Assume projected output.

Your goal is to estimate rate of return under each of these scenarios. You may have to use Solver in Excel or go by trial-and-error.