Solar Energy: Decoding the Calculations

The biggest obstacle to successful solar project implementation occurs before any permits are pulled, before a single panel is delivered to the job site and well before the utility authorizes the system to begin producing power. That obstacle is decoding the value proposition for the customer in terms that are easily understood based on a non-expert grasp of a typical electric bill. The following series of tutorials seeks to break down the experience for the prospective solar adopter and arrive at a basis for understanding the probability that a Power Purchase Agreement (PPA) will remain a strong value over time. Just as importantly, and germane to Titan Energy’s procurement services, this analysis seeks to answer the value question within the context of generation rates typically paid in Eversource Connecticut territory.

Please note: this example features actual project and customer data from a mid-size commercial account (Rate 35) in Connecticut, served by Eversource.

Understanding the Calculations:

The table below (Figure 1) represents the Year-1 breakdown of the value proposition presented to the customer for a typical 300 kW behind-the-meter system:

  • Column 1 designates the year being evaluated.
  • Column 2 is the annual solar output in kilowatt-hours, which represents a certain percentage of the facility's annual electricity demand. A reputable solar developer will never over-size the system beyond 100% of the facility’s annual power demand.
  • Column 3, Solar Electricity Cost/kWh, is the fixed price paid by the customer to the solar array owner for every kWh generated by the solar array.
  • Column 4 is the equivalent price of each kilowatt that would normally be purchased by the utility, but instead, is offset by lower-cost solar power.
    • The key question is how solar power cost compares to your best alternative, which for most folks, is continuing to buy power from the utility. This number is your price to compare.
  • Column 5 represents the difference in cost per kilowatt-hour ($.10117-$.061= $.0402)
  • Column 6 is the annual dollar savings.

Figure 1.

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