| Scenario | CAPEX | Year-1 Energy (kWh) | Tariff (per kWh) | Discount Rate | Life (years) | O&M (annual) |
|---|---|---|---|---|---|---|
| Rooftop commercial | 5,000,000 | 480,000 | 55.00 | 10% | 25 | 150,000 |
| Warehouse with higher tariff | 7,500,000 | 650,000 | 65.00 | 12% | 25 | 220,000 |
- Energy in year t: Et = E1 × (1 − d)^(t−1)
- Tariff in year t: Pt = P1 × (1 + g)^(t−1)
- Benefit in year t: Bt = Et × Pt
- Net cash flow: CFt = Bt − O&Mt − Inst − Rept + Residual
- Present value: PVt = CFt ÷ (1 + r)^t
- Net present value: NPV = Σ PVt (t = 0…N)
- Enter project CAPEX, rebates, and any investment credit percentage.
- Provide energy assumptions: either year-1 kWh or enable capacity factor mode.
- Set tariff per kWh and escalation, then add O&M and insurance costs.
- Optionally schedule inverter replacement and set end-of-life residual value.
- Click Calculate NPV to view results above the form.
- Use Download CSV for detailed modeling or Download PDF for sharing.
NPV supports capital approval and contract pricing
Net present value discounts future cash flows into today’s currency. When NPV is positive at your hurdle rate, the solar scope adds value to the construction budget. Net CAPEX is modeled as CAPEX minus rebates and investment credits, so incentives reduce the year‑0 outflow. Use a discount rate aligned with financing, risk, and opportunity cost, then compare alternative system sizes using the same rate. Use NPV to rank bids across vendors quickly.
Energy yield inputs shape yearly benefits
Year‑1 energy can be entered directly, or estimated from system size and capacity factor. For example, 300 kW × 8,760 hours × 18% produces about 473,040 kWh in year one. That energy is multiplied by your tariff to estimate avoided utility spend or export revenue.
Tariff growth and degradation change long‑term value
Escalating tariffs increase benefits over time, while module degradation reduces delivered kWh. With a 6% annual tariff escalation, a 55.00 rate becomes about 92.87 by year 10. With 0.6% degradation, year‑10 energy is about 447,900 kWh. Modeling both keeps savings forecasts realistic, especially on long horizons where small percentage changes compound.
Lifecycle costs protect the forecast
Operating costs should be escalated just like tariffs. A 150,000 annual O&M budget rising 5% becomes about 232,000 by year 10. Insurance can be added separately, and major replacements can be scheduled as lump sums, such as a 450,000 inverter replacement in year 12. The model also allows an end‑of‑life residual value as a percentage of original CAPEX, credited in the final year to reflect salvage or resale.
Using outputs to make a build decision
Beyond NPV, this tool reports IRR, profitability index, payback, and LCOE. A profitability index above 1.0 indicates discounted inflows exceed discounted outflows. Use discounted payback to judge liquidity, and LCOE to benchmark against expected utility rates for the same project horizon. When presenting to stakeholders, export CSV for audit trails and PDF for approvals, using the same assumptions shown above the form.
How is NPV calculated here?
Each year’s net cash flow is discounted using PVt = CFt ÷ (1+r)^t and summed from year 0 to the final year. Year 0 is net CAPEX. The last year can include residual value.
What discount rate should I use?
Use your project hurdle rate or weighted cost of capital, adjusted for site and counterparty risk. A higher discount rate lowers present values and usually lowers NPV, so keep it consistent when comparing alternatives.
When should I enable capacity factor mode?
Enable it when you know system size and an expected utilization rate but do not have a detailed production study. The calculator estimates year‑1 energy as kW × 8,760 × capacity factor.
How are rebates and credits treated?
Rebates are subtracted from CAPEX, and the investment credit is applied as a percentage of CAPEX. Both reduce the year‑0 cash outflow, which improves NPV and profitability index if all other inputs stay the same.
Why can NPV be negative even with high energy output?
High discount rates, low tariffs, high O&M, large replacements, or aggressive degradation can outweigh savings. Check tariff escalation, inverter replacement timing, and cost escalations, then rerun with a sensitivity case.
What is the difference between simple and discounted payback?
Simple payback uses cumulative nominal cash flows to find the first year the total turns positive. Discounted payback uses cumulative present values, so it typically occurs later because future savings are worth less today.