Path-Q Solar

How should system degradation be included in a solar ROI estimate?

Answer

Reduce modeled annual production over time using a documented degradation assumption, beginning with the expected first-year output. Apply the reduction to future production and recalculate annual savings, cumulative cash flow, payback, and lifetime return.

Key points

  • Do not apply degradation to the initial system cost; apply it to future production.
  • Use the equipment warranty or a defensible assumption rather than assuming constant output.
  • Consider whether degradation is linear, stepwise, or otherwise specified by the model.
  • Show how the result changes under lower and higher degradation cases.

What it depends on

  • First-year production estimate
  • Module and system warranty assumptions
  • Annual degradation rate or schedule
  • Electricity value in each year
  • Maintenance and component replacement assumptions
  • Analysis period

Risks and trade-offs

  • A small annual reduction compounds over a long analysis period.
  • Actual output can vary for reasons unrelated to degradation, including weather, shading, failures, and soiling.
  • Using a very long lifetime can make the result highly sensitive to uncertain later-year assumptions.

Information you may need

  • Expected first-year production
  • Relevant equipment performance documentation
  • Planned analysis period
  • How production translates into bill savings or export value

Your next step

What to do next

Add a year-specific production row to the ROI model and compare at least three degradation assumptions.

Path-Q

Find the right next step

Answer a few questions and we’ll narrow your options.

Loading…

SQ01655