Same products are from the same manufacturers and yet most everything – including the price and solar production – is different. How could that be?
Most people understand that each installer is probably going to give you a different price. If you’ve ever had to gather quotes for a new roof or another similar project you know what I mean. It’s the same roof, you ask for, the same shingles, and yet you can often get wildly different numbers.
However, solar is in a whole different league. Because it is in a different league, in addition to a labor and materials estimate, your solar quote includes a myriad of assumptions. Yes, there are the roof measurements which are probably never exactly the same when done by two different companies, but there are other items that go into the “projected future” your proposal includes.
There are at least five other key assumptions any proposal will include. Your electricity rate today, electricity inflation rate, the value of any potential incentives, your system’s electricity production, and your panels degradation rate.
The rate you are paying your utility for each kW hour of electricity you use is the cornerstone to your prospective system’s payback. Additionally, most utilities change their rate every six months. It can go up, it can go down, and it may vary by season of the year. So what rate is each of your proposals using?
Perhaps more importantly, what is the electricity inflation rate that they used? The cost of electricity, like everything else, is definitely going to go up over time. Additionally, most proposals give you a 25-year projection for your system. But are all of the proposals using the same inflation rate?
What about the potential incentives you might earn? In many locations all you have is the Federal Investment Tax Credit, but is the rate used in the proposal right given your circumstances?
Lastly, there is the estimated system solar production. Many installers use a “rule of thumb”. For example, an average system with 5,000 watts will produce 1.2 kW hours per watt of power per year, so a 5,000-watt system would generate 6,000 kW hours of solar production for your home or businesses’ use. Whereas, your home or business is probably not “average”. It might face East, or West, or South – it might have a lot of trees around it or just a few – and there might be a chimney or HVAC system that is also casting a shadow at certain times of the day. In short, how exactly did each proposal arrive at its 25-year production estimate.
The technology to figure out a more accurate “watts to electricity” solar production “multiplier” has advanced over the years. When we started installing solar back in 2006 we used a Solar Pathfinder. To use that device, you sat down on the roof, held it level to your lap, and took some readings. Then around 2012 or so the Solmetric Suneye device became affordable enough, and dramatically simplified the process. And of course, today you can use satellite imagery which lets a computer do all that math.
But any of those three approaches involve multiple assumptions in and of themselves. Furthermore, the satellite option, which we now use most frequently, requires a truly accurate model of your roof and all the surrounding trees. If we skip drawing in a tree or a chimney, the computer may give us a much better answer than will occur in real life. It’s truly a classic “garbage in, garbage out” process. In the end, your proposal and the model utilized to create it might – or might not – be accurate. That’s why, whenever we are looking at a particularly complex roof or tree situation, we’ll use a Suneye to double check our numbers and the accuracy of our model.
Lastly, every solar panel degrades over time, but the degradation rate varies. It can vary by brand as well as models within a brand. Generally, the more expensive the panel the lower the degradation rate. The differences between panels are often counted in 10ths or even 100ths of a percent, but it is another detail that goes into your system’s production numbers, hence the financial projections provided in your quote.
But, you say, that seems like we’re making it overly complex? You might ask, “how much does all of that really matter?”
The answer is it truly does matter. A lot.
Consider two proposals with different baseline assumptions. They both use the exact same materials and are for the exact same site. But, as you can see in the table below, they make slightly different assumptions:
|Assumption*||Proposal #1||Proposal #2|
|Electricity Rate per kWh||$0.15||$0.16|
|Electricity Inflation Rate||3.7%||3.8%|
|Roof Solar “Quality”||90% of ideal||91% of ideal|
|Incentive Value||$0.17 kWh||$0.18 kWh|
Those assumptions are pretty much the same, for example the roof “quality” is different by a mere 1%. Taken together, those two assumption sets yield dramatically different proposals in the numbers most people would consider most critical:
|Benefits||Proposal #1||Proposal #2|
|Monthly Electricity Savings (1st Year)||$119||$138|
|25 Year Electricity Savings||$53,357||$63,429|
|Monthly Incentive Income||$137||$158|
|10-Year Incentive Income||$16,419||$18,914|
|% of electric Bill Covered||77%||84%|
|25-Year Net Financial Benefit||$67,430||$79,997|
Proposal #2 simply looks a lot better, culminating in a $12,000 higher life-time system benefit. The two systems as noted are identical from a material perspective, but who would fault you for you for picking #2 based on those final numbers?
What Should You Do When Comparing Quotes?
We suggest that once you know what type of equipment you want, pick the installer you feel most comfortable with to install your system because the installer you choose, their honesty, and their attention to doing quality work are truly the biggest variable you will see. As I’ve long said, all models are wrong, some of them are useful. Meaning, don’t pick the winning proposal based on the model, pick it based on the concrete facts you can determine today because the biggest difference will be the quality of the work that goes into your system’s installation.