Download the Making Sense of Solar Numbers Quick Reference.
The solar market is rapidly evolving and costs change drastically from one year to the next. Any project cost numbers should be rigorously checked against the latest equipment cost trends and local and national installation costs. Energy production numbers should be checked
For a public entity, the most important numbers to pay attention to when evaluating a solar proposal include:
1. Levelized Cost of Energy (LCOE)
The LCOE is a calculation of the cost of generating electricity at the point of connection to a load or electricity grid. It includes the initial capital, discount rate, as well as the costs of continuous operation, fuel, and maintenance. This type of calculation assists policy makers, researchers and others to guide discussions and decision making. NREL has a handy calculator for determining the LCOE for any project. Payback and return on investment (ROI) are also common ways to measure the economics of a project.
These metrics are less applicable to PPAs and other third party financing models because the cost of the project is not paid by the host. These projects often see positive cash flow from day one. Responsible project development should include a full analysis of the net cost of the project claimed by the developer (much of which is often absorbed by tax payers through incentives) to promote the development of a efficient, functional solar market.
2. Cost per Watt Installed
Especially when complicated financing models are used, the cost per watt of solar installed may not be clearly presented. This can easily be determined by dividing the cost of the total project by the installed capacity of your panels. As the cost of solar decreases, this is an important number to pay attention to understand if your solar developer is delivering you the best value possible. The latest installed costs for solar in Minnesota can be found on NREL’s Open PV Project Market Mapper. As costs for equipment drop and installation processes become more stream-lined, solar consumers should see the price of solar continuously decrease in the coming years.
3. Production Claims
Claims about the production of solar panels should be double checked for accuracy. The NREL In My Backyard (IMBY) tool estimates how much electricity a specific site can produce through solar. NREL’s tool PV Watts Grid Data calculator uses hourly typical meteorological year weather data and a PV performance model to estimate annual energy production and cost savings for a crystalline silicon PV system.
Incentive programs change frequently in the solar world. Double check project developers have correctly applied all incentives. DSIRE is the best resource for up to date information. Also check with a utility representative to be sure programs are still accepting applications. More resources are available on the Utility Rates and Incentives page.
5. Energy Escalation Rate
The energy escalation rate is a number that is often inflated to make proposals look more attractive. Though the future is unknown, the Federal Energy Management Program publishes an official rate. See the Commercial Electricity Cost Escalation Rates for 25 Year Analysis map for the latest numbers by region. The rate in the Midwest is currently .63% for the commercial REAL electricity cost escalation rate (1.60% for the commercial NOMINAL electricity cost escalation rate).
The Renewable Resource Data Center (RReDC) offers a collection of data and tools to assist with solar resource research. The information provided by RReDC can be used to ensure optimum system siting. In addition, RReDC offers a solar resource glossary, unit conversion information, and an inventory of useful solar radiation and solar energy resources (pdf). Solar resource maps are also available from the NREL Dynamic Maps, GIS Data, and Analysis Tools Web site.
Life-cycle cost analysis (LCCA) is a method for assessing the total cost of facility ownership. It takes into account all costs of acquiring, owning, and disposing of a building or building system. LCCA is especially useful when project alternatives that fulfill the same performance requirements, but differ with respect to initial costs and operating costs, have to be compared in order to select the one that maximizes net savings.
Clean Energy Project Analysis: RETScreen® Engineering & Cases is an electronic textbook for professionals and university students. These training materials cover the analysis of potential photovoltaic and solar water heating projects using the RETScreen® International Clean Energy Project Analysis Software, including a technology background and a detailed description of the algorithms found in the RETScreen® Software. A collection of project case studies, with assignments, worked-out solutions and information about how the projects fared in the real world, is available at the RETScreen® International Clean Energy Decision Support Center Website www.retscreen.net.
This page for a consulting service out of New Jersey offers some resource documents that explain the details of PPA Proposals and also an in depth Project Proposal review.