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