Path-Q Solar
How should I model an annual lease payment increase when estimating long-term bill savings?
Answer
Apply the lease escalation to the prior year's lease payment according to the contract, then subtract that payment and the remaining utility bill from the expected annual savings. Compare cumulative net savings with a no-solar baseline rather than comparing only the first-year payment.
Key points
- Use the contractual escalation formula, not a generic assumption.
- Model payment increases and electricity-price changes as separate variables.
- Include degradation, changing household consumption, maintenance exclusions, and contract fees.
- Show the breakeven point and the years in which net savings become negative or shrink.
What it depends on
- Starting lease payment
- Escalation percentage or formula
- Contract term and fees
- Annual production and degradation
- Utility rates and export value
- Residual utility bill and consumption changes
Risks and trade-offs
- Compounding escalations can make later payments substantially larger than the initial payment.
- Assuming utility prices rise faster than lease payments can overstate savings.
- A lease may remain payable even when production or household usage changes.
Information you may need
- Exact lease payment schedule and escalation clause
- Production estimate by year
- Current bills and export treatment
- Expected changes in household usage
Your next step
What to do next
Build an annual schedule using the exact escalation clause and test it against several electricity-price and production scenarios.
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