Inputs
Formula used
- Annual production: Et = E1 × (1 − d)(t−1)
- Grid rate escalation: Rgrid,t = Rgrid,1 × (1 + g)(t−1)
- Baseline grid cost: Cgrid,t = Et × Rgrid,t
- PPA payment: Cppa,t = Et × Rppa,1 × (1 + p)(t−1) + Ft
- Ownership cost: Cown,t = O&Mt + LoanPayt + Replt − ITCt
- Discount factor: DFt = 1 / (1 + r)t
- NPV savings vs grid: NPV = −DownPayment + Σ (Cgrid,t − Coption,t) × DFt
- LCOE (discounted): LCOE = (PV of option costs) / (PV of energy)
- Loan payment (amortized): Pay = L × [i / (1 − (1 + i)−n)]
How to use this calculator
- Enter the analysis term and your expected year‑1 production.
- Set degradation, grid rate, escalation, and discount rate.
- Fill ownership costs, incentive percent, and any financing terms.
- Enter the PPA rate, escalator, and optional annual fee.
- Click Calculate to see NPV savings and payback.
- Use CSV for detailed yearly cashflows and auditing.
- Use PDF for a quick decision summary to share.
Example data table
| Scenario | Term (years) | Year 1 kWh | Grid rate | Installed cost | PPA rate | Best by NPV | NPV savings (Own) | NPV savings (PPA) |
|---|---|---|---|---|---|---|---|---|
| Example | 20 | 160,000 | $0.1400 | $120,000 | $0.0950 | Ownership | $144,128.82 | $96,829.46 |
Show the first 10 years of example cashflows
| Year | kWh | Grid cost | Own cost | Own savings | PPA cost | PPA savings |
|---|---|---|---|---|---|---|
| 0 | 0 | $0.00 | $48,000.00 | $-48,000.00 | $0.00 | $0.00 |
| 1 | 160,000 | $22,400.00 | $-22,732.84 | $45,132.84 | $15,200.00 | $7,200.00 |
| 2 | 159,040 | $22,933.57 | $13,303.16 | $9,630.41 | $15,410.98 | $7,522.59 |
| 3 | 158,086 | $23,479.85 | $13,339.88 | $10,139.96 | $15,624.88 | $7,854.97 |
| 4 | 157,137 | $24,039.14 | $13,377.34 | $10,661.80 | $15,841.75 | $8,197.38 |
| 5 | 156,194 | $24,611.75 | $13,415.54 | $11,196.21 | $16,061.64 | $8,550.11 |
| 6 | 155,257 | $25,198.00 | $13,454.51 | $11,743.49 | $16,284.57 | $8,913.43 |
| 7 | 154,326 | $25,798.22 | $13,494.26 | $12,303.96 | $16,510.60 | $9,287.61 |
| 8 | 153,400 | $26,412.73 | $13,534.80 | $12,877.93 | $16,739.77 | $9,672.96 |
| 9 | 152,479 | $27,041.88 | $13,576.15 | $13,465.73 | $16,972.12 | $10,069.76 |
| 10 | 151,564 | $27,686.02 | $13,618.33 | $14,067.69 | $17,207.69 | $10,478.33 |
Procurement choice and risk allocation
Solar procurement affects capital planning, risk, and long‑term operating cost. A PPA typically shifts performance risk, operations, and some compliance responsibilities to the provider, while ownership concentrates control and risk with the project team. This calculator compares both structures against a grid baseline so stakeholders can align financing capacity, contractual appetite, and sustainability targets. Run sensitivities on rates and discounting to test robustness.
Energy yield and escalation modeling
The cashflow engine starts with year‑one production and applies annual degradation to estimate delivered energy. It then escalates the avoided grid rate and the PPA price separately, allowing realistic “rate spread” scenarios. When grid escalation exceeds the PPA escalator, PPA savings can widen over time; if the opposite occurs, ownership may dominate if costs are controlled. If export credits are discounted, lower the effective grid rate used.
Financing and incentive timing
Owned systems can be modeled as all‑cash or partially financed. Loan payments are calculated with standard amortization to reflect predictable debt service, while incentives are treated as a first‑year benefit that reduces effective cost. O&M escalation captures labor and parts inflation, and a major replacement year supports inverter refresh planning for commercial roofs and ground arrays. Include contingency for permitting delays and unexpected interconnection upgrade costs early, often.
Interpreting NPV, LCOE, and payback
Net present value converts future savings into today’s money using the discount rate, making options comparable across terms and risk profiles. LCOE divides discounted costs by discounted energy to show an effective cost per kilowatt‑hour that can be benchmarked against tariff forecasts. Simple payback is reported for communication, but NPV is the stronger decision metric. Review multiple scenarios rather than relying on a single point estimate.
Construction project considerations
For construction organizations, procurement choice can affect bid competitiveness and schedule. Ownership can improve life‑cycle economics where capital is available and interconnection is stable. PPAs can protect cash and simplify operations on multi‑site programs. Always validate meter configuration, export credits, tax structure, insurance, and termination clauses before final selection. Document responsibilities for outages, access, and roof warranty coordination.
FAQs
What does “best option” mean in the results?
It is the option with higher net present value savings versus the grid baseline, based on your discount rate, escalation assumptions, and cost inputs.
How should I choose the discount rate?
Use a rate that reflects your organization’s cost of capital and risk tolerance. Higher discount rates reduce the value of distant savings and can favor contracts with lower upfront spending.
Why is the incentive modeled in year one?
Many incentives are realized shortly after commissioning through tax credits or rebates. Modeling it in year one provides a conservative, simple timing assumption you can adjust in detailed project finance.
Does the calculator include export or net metering rules?
It assumes each solar kilowatt‑hour offsets an equivalent grid kilowatt‑hour. If export credits are lower than retail, reduce the grid rate to an effective blended value.
How are loan payments calculated for ownership?
Payments follow standard amortization using the financed amount, annual interest rate, and term. If you set the interest rate to zero, the calculator spreads principal evenly across the term.
What inputs matter most for the decision?
Grid escalation, PPA escalator, installed cost, and production are typically most sensitive. Validate energy modeling, confirm contract fees, and test multiple scenarios before committing.