Finance
Return on Investment (ROI) is a financial metric that measures the profitability of an investment as a percentage of the original cost. It’s calculated by taking the net benefit (gain minus cost) of the investment and dividing it by the cost. In solar investing, ROI can refer to the percentage return earned from installing a solar energy system, often derived from energy savings (for rooftop solar) or revenue from selling power (for a solar farm) relative to the upfront investment. For example, if a solar installation costs $100,000 and yields $10,000 per year in savings or income, the ROI in the first year is 10%. ROI is a simple way for investors to gauge efficiency of an investment and compare it with other opportunities, though it doesn’t account for the time value of money (unlike metrics like IRR).