Financial Modeling Glossary

This article will provide a glossary with additional information on each of the sections available in the Financial Modeling interface. Three different areas of the interface will be described in detail:

1. Overview Page

2. Financial Templates

3. Utility Rates

1. Overview Page

Utility Rate and Consumption Selection

Term Definition
Flat Rate Uses a flat $/kWh rate for energy (as opposed to a full utility rate with different rates by time or season). Note: currently assumes $0/kWh for any exported energy. We want this to assume exports = imported costs
Select Rate Search for a utility rate from a list of existing utility rates
Usage Site Select a weather station for use in predicting site consumption.
Building Type Select a building type for predicting site consumption. Based on DOE hourly load profiles from OpenEI

Financial Metrics

Term Definition
System Start Date of system installation. Used for calculating payback period because the date of install will determine what utility rates are applicable.
Total Value of Energy Sum of all energy revenue for the life of the system. Not discounted to present value.
Lifetime Value (NPV) Sum of all energy revenue for the life of the system. Discount to present value.
Internal Rate of Return (IRR) A metric used to estimate the profitability of potential investments. The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. ( Investopedia definition)
Return on Investment (ROI) Value from electricity savings divided by investment cost.
Payback Period Time required (in years) for the system to cover the initial investment.
Levelized Cost of Energy Calculated as the net present value of all costs over the life of the system divided by the net present value of energy generation over the life of the system.

2. Financial Templates

Modeling

Step Input Definition
System Lifetime Operating Years Number of years the system models.
Install Time (Months from Present) Allows user to define how many months from today the system will start operating. Used for calculating payback period. See System Start above.
Analyze Solar Production Data Brings in the simulation data for the production of the solar array. A required step.
Analyze Usage Data Imports usage data as entered by the user. A required step.
System Degradation Annual Degradation Rate Amount of energy loss due to aging that occurs in each year. Often the warrantied degradation rate will be used, there are other factors that may also be included. User sets one value that is applied every year of system operation.
Simulate Demand Profile Compares usage data and solar production data at the interval level to model required inflows and outflows of energy for the site before and after solar.
Model Utility Rate Pricing Assigns pricing information to inflows and outflows of energy computed in the demand profile step.
Utility Cost Escalator Annual Escalation Rate Increases utility prices each year by the rate set in this field.

Prices & Costs

Step Input Definition
Price Per Watt $ / Wdc Pricing input in $/W terms
Fixed Price Price Pricing in flat $ terms
Equipment Replacement Cost Equipment Cost Scheduled cost amount. Typically used for inverter replacement costs.
Year of Replacement Year when scheduled cost occurs
Annual Maintenance Cost Annual Cost ($ / Wdc) An annualized cost expressed in $/W terms. Typically used for panel washing.

Incentives

Step Input Definition
Fixed Incentive
Incentive Amount Total $ amount incentive that reflects a cash inflow for the customer.
Year of Payout Year incentive payment is received. Note: Can be set to year 0 for upfront payments.
Percentage Based Incentive
% of System Price % of system price that is eligible for a refund. For example, the 30% Investment Tax Credit is a payment of 30% of the total system price.
Tier Limit Sets a total $ limit for the amount of incentive that the system can receive. Example, 30% of the total system price, up to a payment of $5000. Note: Tier limits are in absolute terms. If the limit for Tier 1 is $5000 and the tier limit for Tier 2 is $5500 then Tier 2 has a tier size of $500.
Payout % % of calculated incentive amount that is applied in a given period. Note: 100% isn't enforced across multiple time periods. For example, 100% can be payed out in year 1 and 100% in year 2.  The incentive would basically be doubled.
Year Year incentive payment is received. Note: Can be set to year 0 for upfront payments.
Reduced Basis When reduced basis is toggled on the incentive step will look to see if there are any other % Based Incentive steps earlier in the model, if so, this incentive step will use the price after incentives for calculating the incentive. Example: $10,000 total system price - $3,000 Federal Tax Credit =

$7,000 After Incentive Total

A 10% state tax credit would use the after incentive total of $7000 to calculate a $700 incentive. If reduced basis was toggled off the state credit would jump to $1000 (10% of the pre-incentive amount).

Price Per Watt Incentive
$ / Wdc Incentive amount calculated in $ per DC watt.
Tier Limit Sets a limit on the number of DC Watts (system size) that is eligible for that incentive tier. Example: a $0.10/W incentive with a 5000 W tier limit is essentially capped at $500. Note: Tier limits are in absolute terms. If the limit for Tier 1 is 5000W and the tier limit for Tier 2 is 5500W then Tier 2 has a tier size of 500W.
Payout % Incentive % of calculated incentive amount that is applied in a given period.  Note: 100% isn't enforced across multiple time periods. For example, 100% can be payed out in year 1 and 100% in year 2.  The incentive would basically be doubled.
Year Year incentive payment is received.  Note: Can be set to year 0 for upfront payments.
Production Based Incentive
$ / kWh Incentive amount calculated in $ per kWh
Tier Limit Sets a limit on the number of kWh that are eligible for that incentive tier each year. Example: a $0.10/kWh incentive with a 5000 kWh tier limit is essentially capped at $500. Note 1: This incentive currently works differently from the others in that the first tier does not assume infinity even when it is the only tier. Set the tier limit to '999999999' to solve this. Note 2: Tier limits are in absolute terms. If the limit for Tier 1 is 5000W and the tier limit for Tier 2 is 5500W then Tier 2 has a tier size of 500W.
Incentive Duration (Years) Sets the number of years where kWh production is eligible for this incentive.

Financing

Step Input Definition
Cash Financing Allows the user to define a cash purchase. Though it's not necessary since the lack of any financing defaults to cash.
Loan Financing
Downpayment A fixed dollar amount that is outlaid in year 0. Note 1: The loan applies to all year 0 costs. So the downpayment will replace all year 0 costs, but not later years' costs. Note 2: The downpayment will be reduced by any year 0 incentives.
Loan Terms (Months) Number of months over which the loan is paid back.
Annual Percentage Rate The cost of borrowing money.
PPA Financing
Downpayment A fixed dollar amount that is outlaid in year 0.  Note 1: The loan applies to all year 0 costs. So the downpayment will replace all year 0 costs, but not later years' costs. Note 2: The downpayment will be reduced by any year 0 incentives.
End of Term Payment Cash outflow at the end of the PPA term.
PPA (per kWh) The cost per kWh of the PPA.
PPA Term (Years) The number of years over which the PPA is paid.
Escalation Rate The cost escalation rate of the PPA. If the PPA Rate is $0.10/kWh and there's a 10% escalation rate the PPA will cost $0.11/kWh the following year.
Interest Deduction Saving This step is paired with the Loan Financing step to account for the interest deduction benefit applied to State or Federal taxes. For example: if the loan has a tax-advantaged interest payment (like a mortgage), then the user can specify what tax rate applies to the interest deduction calculations.
Federal Tax Rate Federal tax rate for calculating deduction savings. Can be zero.
State Tax Rate State tax rate for calculating deduction savings. Can be zero.
MACRS Depreciation A commercial incentive that allows business to depreciate their solar asset faster (i.e. lower their taxes). You can read more in this blog post
Effective Tax Rate The combined tax rate that drives the tax benefit for the depreciation calculation. Can be the Federal Tax Rate, the State Tax Rate, or a combination of the two.
Bonus Depreciation Bonus depreciation occurs in year 1, as opposed to standard Depreciation Basis which is scheduled over multiple years. Note: operating in absolute %. If you want 85% of the system to be depreciated and 30% of the system price to be depreciated in year 1 as bonus depreciation you will set Depreciation Basis = 55% and Bonus Depreciation = 30%
Depreciation Basis Amount of the total system price that is eligible for a depreciation schedule (as opposed to bonus depreciation). Typically set at 85% unless reduced by bonus depreciation (see Bonus Depreciation for more details).
Depreciation Schedule Defines the schedule upon which the Depreciation Basis is depreciated. User sets up the number of years and the percentage of depreciation in each year. Note: regardless of Depreciation Basis %, the annual schedule should add up to 100% because each year is a percentage of the basis (which is already reduced to the basis amount.
Discount Rate Allows the user to define the time value of money. Typically set to 10% to account for the value you could get by putting your money in another investment. Further reading

Environmental Metrics

All the environmental metrics use the same calculation formulas. This is documented in further detail in our Help: Proposals in HelioScope - HelioScope Knowledge Base

3. Utility Rates

Overview

Term Definition
Apply Date Sets the date that the utility rate is effective from

Energy Charges

Term Definition
Apply Net Metering Assigns whether the utility rate gets full value for exported energy or zero value for exports. 
Non-bypassable Charges (per kWh)

Non Bypassable Charges are line items on your bill that generation credits cannot be “passed” or applied to. 

California utilities refer to the customer’s annual NBCs that cannot be offset by Net Energy Metering (NEM) Credits under NEM 2.0.

Rate Editable field - allows user to rename the rate (ex. "Summer Peak", "Winter Off-Peak", etc.). Users can define a variety of rates to match the time of use
cost (per kWh) $/kWh charges that are applied in this rate
monthly cap (kWh) A tier limit that applies to each tier of pricing for a given rate. In absolute terms (e.g. tier 1 = 1000 kWh, tier 2 = 1500 kWh ==>> tier 2 applies to 1001-1500 kWh
Net Meter Rate The rate applied to net monthly exports. Note, this is different from instantaneous exports in a month. The Net Meter Rate only applies to monthly surplus generation.
Time of Use Allows users to define days of the week that different rates apply. Primarily for weekend vs weekday pricing.Note: Default inherits whatever days are not selected in another day table. For example, if you select Saturday and Sunday in another day table default with be MTWTF since those were not selected.