After the Bids, Crunching the Numbers: Page 2 of 2


Inside this Article

Introductory article graphic.
A Washington DC row house
There’s no prescriptive path for solar-electric systems, since each site is different. Several configurations were proposed for this row house’s rooftop (see illustrations).
The example row house roof
The example row house roof, with the Capitol Power Plant in the background­—the largest source of pollution in the nation’s capital.
Roof showing air-conditioning compressor as obstacle to PV modules.
Unfortunately, when the air-conditioning compressor was placed, no thought was given to the placement of future PV modules.
Introductory article graphic.
A Washington DC row house
The example row house roof
Roof showing air-conditioning compressor as obstacle to PV modules.

Interpreting the Results

As you review the ”Results” table, keep in mind:

  • With net metering, sizing your system to get as close as possible to producing 100% of your annual electricity consumption is the most cost-effective plan. Both your PV system’s production and your energy consumption vary each year, so “close” is the best you can do. (And as appliances are replaced or added, consumption will change.)
  • The negative net present value (NPV) for most options is a result of the owner’s savings investment rate, which we assumed to be 4%. In all cases, NPV is more than $0, so one would be that much “richer” today for having made the investment. In the case of 0%-down leasing, one would be that much “poorer” for making such an investment. If you don’t have the cash or can’t get a loan, then get a $0-down lease, as you will lose less money on such an investment than paying the “noninvestment” of your monthly electric bill.
  • The highest NPV and/or IRR—or shortest simple payback (SP)—should not be the only factors you consider when choosing a vendor. Also make sure to consider the quality of equipment and warranties offered, and the installer’s experience and follow-up service capabilities. These factors must be qualitatively evaluated and they are not easily quantified for a NPV or IRR analysis.
  • In the IRR for Vendor B, “DIV/0!” is a Microsoft Excel error code for division by zero. Excel’s IRR function requires at least one negative number (more cash out than in) during one investment year. The 0% down leasing option is cash-flow positive from the start (compare SP and NPV instead).
  • Because it accounts for overall system efficiency, the metric of $/kWh/year is more useful than $/nameplate watt.


From purely a financial standpoint, our results show that a prepaid lease of a PV system might be the most financially advantageous. However, leases are a relatively new option and have not been well-tested in the marketplace. Make sure you understand all the ins and outs of a lease—such as liability, performance guarantees, and access for maintenance—before you sign. There is also some risk that the leasing company might go out of business (which doesn’t necessarily mean you end up with a free system). Leasing may be a preferred option if you cannot immediately absorb incentives in the form of tax credits (they may be carried over to future years).

The leasing company will contract another party to install the system, and will receive all of the incentives. Depending upon which state you live in, a solar leasing company may either “lease” you the PV equipment on your roof, in which you receive the benefits of its production, or sign a power purchase agreement (PPA) with you, where you contract to pay for the electricity at a set rate, usually below, or at least at the current utility retail rate. In either case, you don’t own the system or have to maintain it. At the end of the lease term, you sometimes are able to buy the system at a “salvage value” cost or it will be removed by the hardware owner.

There are two other major financial benefits to leasing or purchase beyond IRR and NPV:

  • Electricity prices are locked in. You no longer are affected by utility rate increases. In fact, if rates rise, your actual NPV and IRR will improve.
  • In most locations, a PV system increases the home’s resale value (probably more if you own, rather than lease, the system), possibly enough to offset most or all of your initial capital outlay for the system.


Andy Kerr spends part of his year living in the Capitol Hill neighborhood of Washington, DC, where he advocates for nature and writes about energy efficiency and renewable energy.

DC Solar United Neighborhoods (DC SUN) •

Comments (6)

whittakerj's picture

I created this Excel program to calculate your on - grid solar savings from actual numbers.

Marc Fontana's picture

I'm interested in the customizable spreadsheet mentioned on page 80 (at I visited the link but I don't see it. What is the name of the file? Thanks

Scott Russell's picture

In the meantime, you can now download this .xls file from the "Inside this Article" pane in the upper right of this page. Cheers.

Michael Welch's picture

Hi Marc. Thanks for letting us know it is not there. Should be available shortly. Michael, HP Senior Editor

Robert Winfield_2's picture

An EXTREMELY inportant consideration, especially in a city or other densly populated area are Solar Right, "Ancient Lights". Who owns your sunlight. Surprise!! YOU DON'T own your sunlight in many parts of the US.
Eden Roc vs Fountainbleu ~1951. one hotel shaded the others pool area from ~2pm in the afternoon.
I did not get any easements, conveyable or otherwise from my previous neighbors when I installed my 1.3kW array in 1998. I had a beautiful solar arc, which was one of the main reasons I bought it
In 2006 my neighbors sold and bulldozed the house 14ft away that was about 2-3ft higher.and replaced with one that was 3 times taller (it would have been 4 times taller if I had not screamed at the building inspector in a moment of unhappiness) and 5 times larger.
Now I have shade instead of sunlight and was told by city, county and state officials that they sympathized but I was out of luck unless I wanted to sue, but told i would lose (wish i had anyway) or I could move my PV array at my expense etc

Justine Sanchez's picture

Hi Robert,
Thanks for posting your story here. You bring up an excellent point, and one that we generally haven't focused on when discussing solar access. Normally we consider existing buildings and vegetation (and how vegetation will grow)...but having your neighbor's house "grow" to the extent yours did had to be quite a shock. I personally don't have experience with solar easements and your story makes me wonder what the process (and cost) for obtaining one would have been like? Regardless, thanks so much for posting your insightful comments.

-Justine Sanchez
Home Power

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