The 18-Month Payback Problem

Industrial plants are unique—each sits at the nexus of specific geographic, technological, regulatory, and financial forces. But once operating, they all share a similar governing ethos: deploy capital to maintain or increase margins.

How?

By reserving hard-earned capital for projects meeting stringent return benchmarks.

Most plants require an 18-month simple payback for energy projects.
Invest $1 million, see $1 million in savings within 18 months.

That's a 22% IRR—not bad.

The Solar Reality Check

Consider a typical industrial plant paying 6 cents per kWh.
A 1MW solar array generates roughly 2 million kWh annually, saving $123K per year.

But at $1.25/watt installed ($1.25M total), even with a 30% ITC reduction, you're looking at a 7-year payback.

7 years vs. 18 months.
The math doesn't work.

The Workaround—and Its Limits

Power purchase agreements addressed this by letting patient capital invest while delivering modest savings to plants.

But here's the catch:
If an energy services agreement increases operating costs (even without capex), it violates the core rule—maintain or increase margins.

This economic constraint is one of the variables that helps to explain why only 5% of U.S. industrial process heat has been electrified.

Until we solve the payback problem, industrial decarbonization will remain slow.

What creative financing structures have you seen work around the 18-month barrier?