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Solar Project BuilderHelp Search help text Tax Status open this in its own windowPlease indicate the taxable status of your entity. Being a tax exempt can impact the finances of your solar system (e.g., the Federal ITC, depreciation). Certain types of entities are tax exempt, including: non-profits, educational institutions, municipalities, religious institutions, charitable organizations, social welfare organization, State Agencies, Veteran’s organizations, and Political organizations. For more information, explore the IRS Resources for Tax-Exempt Organizations. Year 1 Generation open this in its own windowPlease enter the amount of electricity that will be generated in the first year of the solar installation. This information is usually provided to you by the solar developer or installer by using industry standard modeling tools. However, if an estimate has not been provided or if you would like to run your own scenarios, NREL’s PVWatts tool allows users to easily estimate the production of hypothetical systems based on their geographic location. When using PVWatts, if you don’t know the particular details necessary for the inputs, utilize the automatically generated inputs. The final screen will give you a general estimate of the annual kWhs produced by that system. Of note, this tool asks for the system size in kW DC.  System Term open this in its own windowPlease enter the total expected life of the system. If you have received a bid from a solar company, they should have listed how many year’s they modeled your system for and you should use that same number for apples to apples comparisons. Solar panels typically have 25 year performance warranties; PV systems being installed can be expected to last 30+ years.  Electricity Rate Escalator open this in its own windowPlease enter the electricity cost escalator rate.  This is an estimate of the inflation at which the electricity rate will increase. The Energy Information Administration provides historical electricity price data broken down by state and end user type. This historical data can be used to compute a benchmark for the expected future inflation in energy prices. Many solar contractors use an escalator of 2-4% in their modeling. It is recommended to error on the side of a lower escalation rate to ensure the model is providing a “worst case scenario” and not overpromising financial cost and payback.  Debt Closing Costs open this in its own windowPlease enter the total amount of any debt-related transaction and closing costs. Closing costs are fees and expenses you may have to pay when you close on loan. Debt Interest Rate open this in its own windowPlease enter the debt interest rate. Debt interest rate is the annualized interest rate charged on the outstanding balance. Public markets can provide debt at interest rates as low as 3% – 3.5% while private lenders may be in the 6% – 10% range depending on credit quality and term length. PPA Escalator open this in its own windowPlease enter the PPA escalator if applicable. PPAs will often have an escalator which applies to the Year 1 PPA rate. This allows the price of electricity from the solar installation to increase over time in a predefined schedule. Typically this escalator will be lower than the expected inflation in electricity rates, and is usually in the range of 1% – 2%. PPA Buyout Year open this in its own windowPPAs will often allow the customer to buyout or purchase the system at certain predefined times during the life of the agreement, typically after the tax benefit period which is in the first six years. For example, a 25 year PPA contract may specify that the customer can purchase the system from the investor in years 7, 15, and 20, allowing them to convert to a direct ownership model early. Annual Lease Payment open this in its own windowPlease enter the annual lease payment. Under an operating lease, the customer will pay fixed payments to the investor. This can be in the form of monthly, quarterly, or yearly payments. Please enter the total annual payment for this field. Annual payments for a 7-year solar operating lease typically fall between 9-12% of the total installation cost, though this may vary depending on specific project details and capital provider. Lease Term open this in its own windowPlease enter the lease term. This is the term of the operating lease agreement in years. Residential solar leases are usually for 20 to 25 years. Commercial solar leases can be customized, and generally range from 7 to 20 years. State Cash Incentives open this in its own windowPlease enter the total amount of cash incentives received through any State programs. Numerous states and utilities have incentive programs to accelerate the adoption of solar. These can come in the form of upfront cash incentives, production based payments, or solar renewable energy credits. For example, Wisconsin offers solar cash incentives through the state’s Focus on Energy program. A useful resource to search for incentive programs by region is the Database of State Incentives for Renewables & Efficiency (DSIRE).   Insurance open this in its own windowPlease enter the cost of any necessary insurance for your PV system.  All solar projects will require insurance and typically cover general liability insurance and property insurance, environmental risk insurance, business interruption insurance and so forth. Often coverage for your solar can be added into existing insurance policies for little or no cost. Depending on the size and other characteristics of the project, insurance for solar projects typically falls in the $10-$20/kW/year range.  Inverter Replacement open this in its own windowPlease enter the expected inverter replacement cost. A solar inverter converts DC current from solar PV panels to AC current that can be used by a local electrical network. Most inverters come with a life-expectancy of approximately 10 years, which is much shorter than the life of the panels themselves (25-30 years). As a result, most inverters need replacement after about 10-15 years of service and replacement costs range $0.08-$0.15/W depending on the specific inverters chosen and size of the overall system. Inflation Adjustment open this in its own windowPlease enter the standard inflation assumption. This is the rate by which various operating expenses are escalated year over year. The default is 2%. ITC Basis open this in its own windowPlease enter the Investment Tax Credit (ITC) basis.  The ITC basis refers to the portion of the solar installation cost that is eligible to receive the ITC in dollars per watt. This includes the hard cost of equipment, materials, and parts directly related to the functioning of the installation. It also includes certain soft costs such as developer fees, permitting costs, engineering and design fees, and certain construction period interest. For more information, explore this IRS information on the ITC. ITC Basis Reduction open this in its own windowPlease enter the ITC Basis Reduction.  For solar installations that claim the ITC, the depreciable basis of the asset is reduced by half of the ITC amount. Current tax rules state that this reduction is 50%. Bonus Depreciation open this in its own windowPlease enter the bonus depreciation. This is an incentive which allows a taxpayer to make an additional deduction of the cost of qualifying property in the year in which it is put into service. Informational Note: Bonus Depreciation Starting in 2023, the percentage of capital equipment that can be expensed immediately drops 20% per year (e.g., 80% in 2023 and 60% in 2024) until the provision drops to 0% in 2027. Non-profits are now eligible for the ITC through Direct Pay; they were not before the Inflation Reduction Act. MACRS Depreciation Schedule open this in its own windowPlease enter the MACRS depreciation schedule.  MACRS stands for Modified Accelerated Cost Recovery System and is a method of depreciating assets. Solar projects are long term infrastructure assets that are allowed to use a 5-year accelerated depreciation schedule. For more information, explore: SEIA’s Depreciation Overview IRS MACRS Depreciation IRS MACRS Depreciation Schedules Avoided Electricity Cost open this in its own windowThe total avoided cost of electricity that is provided by the solar installation. This is due to offsetting energy that would otherwise have been purchased from the utility. The rate at which each kWh of solar offsets grid purchased electricity can vary from a simple one-to-one ratio to more complicated mechanisms depending on tariff structure and local regulations. Federal Taxes open this in its own windowFederal Taxes refers to the taxes paid on net revenues from the solar installation including avoided costs and state incentive programs. NPV open this in its own windowNPV stands for Net Present Value and represents the value of future cash flows in today’s value by discounting them at the appropriate rate. This allows for the analysis of projects that have long term cash flows and time horizons.  Positive NPV numbers indicate a good economic investment, while negative NPV indicate a project’s economics are less than optimal. http://www.investopedia.com/terms/n/npv.asp EBT open this in its own windowEBT stands for Earnings Before Taxes and is an accounting subtotal line. Total Lifetime Benefit open this in its own windowTotal Lifetime Benefit is the sum of the Net Economics line in the Cash Flow Projections table. This aggregates the economic benefits of solar from a cash-flow perspective (as opposed to net income which is an accounting measure). This is the true bottom line of the solar installation. Debt Interest Payment open this in its own windowThe Debt Interest Payment is the interest only portion of the debt payment and is used to offset the federal taxes of the solar installation. This is analogous to how mortgage interest is deductible from personal income taxes. Cumulative Benefit Graph open this in its own windowThe cumulative economic benefit of the system over its lifetime Utility Rate vs LCOE Graph open this in its own windowA comparison of the avoided rate of grid electricity vs the levelized cost of solar energyenusen-US1770761641https://solarprojectbuilder.org

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