Path-Q Solar
How should I compare solar savings when one proposal includes future electricity price increases and another does not?
Answer
Recalculate both proposals using the same electricity-price assumptions, then show a range of escalation cases rather than accepting one forecast as fact. Compare present-value savings, payback, and total cost under identical assumptions.
Key points
- Separate current avoided-cost assumptions from projected future price escalation.
- Use at least a flat-price case and one or more alternative escalation cases.
- Apply escalation consistently to the bill components that solar can actually avoid.
- Check whether each proposal uses the same production degradation, system life, financing, maintenance, and discount-rate assumptions.
What it depends on
- Current applicable electricity charges and export treatment
- Which bill components are avoidable
- Production, degradation, and system-life assumptions
- Financing, discount rate, and ownership period
Risks and trade-offs
- A high escalation assumption can make a proposal appear attractive while increasing forecast uncertainty.
- A flat-price case may be conservative but can understate savings if prices rise.
- Comparing proposals with different assumptions is not a meaningful comparison of system quality or price.
Information you may need
- Both proposals' complete savings models
- Underlying price-escalation, production, and degradation assumptions
- Historical bill data and applicable rate structure
- Financing and ownership assumptions
Your next step
What to do next
Put both proposals into one model with common assumptions and report results for flat, moderate, and higher price-escalation cases.
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SQ02690