Performance & Financial Analysis 
Prepared February 19, 2018 for 
John And Jane Homeowner 1 Rolling Hills Rolling Hills, CA 90274 
Prepared by WILLIAM HOWE OWNER HOWE BUILDERS 4135 228 TH. PLACE TORRANCE, CA 90505 Phone: 3103739658  Email: HOWETOBUILDSOLAR@AOL.COM 
Executive Summary
Electric Utility Savings: Anticipate a savings of approximately $6,315 in electric bills (93%) at current utility rates in the first year. Savings will grow as electric utility rates are expected to rise 4.25% a year. The purchase of electric energy (kWh) from your utility is expected to be reduced by 58%. Also, your electric rate has Tiered and TimeofUse attributes, and this project will reduce your average utility electric cost from $0.27 to $0.04 per kWh.
Over 25 years, annual utility savings are anticipated to average $11,302, for a total utility savings of $282,552. In gross income (pretax) dollars, savings average $18,229 annually or $455,730 over the system life.
Performance Summary  

Energy Efficiency Improvements:  Total Electric use will be reduced by 5,294 kWh/Year. See Energy Efficiency Summary page for details. 
Solar Electric (PV) System:  6.12 kW DC (5.875 kW AC, 5.361 kW CEC) producing 9,465 kWh/Year. 


 Property Value Appreciation: $131,660 (firstyear utility savings x 20 years)
 CO2 Saved over System Life: 303 tons. Equivalent to driving 606,000 auto miles
Finance: Cash
The Cost of Doing Nothing
Your Hedge Against Utility Inflation: Your investment in this project will protect you from utility rate inflation.
Utility Cost by Month
Includes monthly NetMetering "TrueUp" to reconcile any netmeter credits accumulated in prior month(s).
Your Hedge Against Utility Inflation: Your investment in this project will protect you from utility rate inflation. Levelized Energy Cost (LEC) analysis provides us with a "hurdle rate" (the levelized energy cost) which can be compared to the expected change in utility rates (by way of utility rate inflation). LEC is the average lifetime cost of energy produced by a particular system. We can compare the LEC to the current utility rate and its expected change in price as time goes on. In this manner one can judge the investment as a "better bet" than utility rates to contain energy costs. Represented below is the average cost of utility energy versus the cost of energy produced (LEC) by your system over time.
Electric: Levelized Energy Cost (LEC)
Carbon Footprint
Your carbon footprint will be reduced. Over the life of your system 303 tons of carbon dioxide (CO2) will be eliminated from your footprint. Equivalent to:
Planting 7,060 trees.  
Driving reduced by 606,000 auto miles, or 30,906 gallons of gasoline.  
Recycling 957 tons of waste instead of sending it to landfill.  
295,250 pounds (147.6 tons) of coal burned.  
and you will help avoid the use of up to 7,380,000 gallons of water by Thermoelectric Powerplants. 
Energy Efficiency Summary
Energy Efficiency Improvements 

Change outdoor lighting from Incandescent to Compact Flourescent . Change outdoor lighting from Incandescent to Compact Flourescent . Improve Replace Existing Pool Filter Pump With Hybrid efficiency by 75%. Improve Use Hybrid Pump Off Peak efficiency by 5%. 
Category  Annual Energy Savings 

Space Cooling  228 kWh Electric 
Electrical Appliances & Equipment  5,066 kWh Electric 
Contract Price Summary: Energy Efficiency Improvements  

No cost for energy efficiency improvements. 
Solar Electric (PV) System Summary
Tilt: 19° Azimuth: 180° 3" Air Gap Shade reduces production: 0%  
PV Panels:  24 x Canadian Solar, Model: CS6P255M 
Inverters:  24 x Enphase Energy, Model: M21560SLLS2x 
Total Panel Area:  400 sqft 
System Peak Power:  6.12 kW DC (5.875 kW AC, 5.361 kW CEC) 
Annual Production:  9,465 kWh. Supplying 37% of annual electric use (47% after efficiency) 
Contract Price Summary: Solar Electric (PV) System  

Contract Amount:  $28,145 ($4.60 per watt DC) 
Incentives available to Customer in 1st Year  
Federal Tax Credit (30% of Gross Cost at Installation):  ($8,444) 
Net Cost at Install (after incentives):  $19,701 
Net Installed Price per Watt:  $3.22 per watt DC ($3.35 per watt AC) 
Sensitivity Analysis: Utility Rate Inflation Scenarios
Sensitivity Analysis is a process of analyzing possible future events by considering alternative possible outcomes.
The average change in utility rates (inflation) over the system life is perhaps the variable which may most affect the return on your investment. The following table summarizes how utility rate inflation may impact your investment. The project, as quoted, is compared to utility rate inflation that averages 5%, 0% and +5% over the system life.
As Quoted  5% Inflation  0% Inflation  +5% Inflation  
Total Utility Savings:  $282,552  $86,494  $157,384  $315,282 
Cash Gained over Life:  $436,029  $119,805  $234,143  $488,815 
Return on Initial Cash Invested (IRR):  58.2%  44.1%  51.7%  59.3% 
Wealth Created Over System Life (NPV):  $211,890  $68,969  $123,497  $234,146 
Utility Inflation, as Quoted: Electric Rates: 4.25%, Natural Gas Rates: 3.78%
How to Interpret Financial Ratios and Measures
A Measure of Security: Cashflow Payback: 1.8 years  1.8 years (modified)
The most common measure of the security of a proposed investment is its payback, defined as the length of time until one gets one`s money back. Cashflow Payback is when cumulative cash flow stays positive for good. Modified Cashflow Payback is when the cumulative cash inflows exceed the total of all cash outflows over the system life; future maintenance expenses are accommodated.
Profitability Index: 11.8
What PI Means: Generally, if PI > 1 then accept the project. If PI < 1 then "qualitative" factors may justify the project.
Profitability Index (PI) is a measure of investment efficiency. It identifies the relationship of investment to its return. Profitability Index (PI) is calculated as: (NetPresent Value of the Returns plus the Initial Investment) divided by the Initial Investment. For example: $19,701 is invested and the NPV of the returns is $211,890, then the PI = ($19,701 + $211,890)/$19,701 = 11.8, or more generically, for every $1 invested you received $11.8 in return.
Net Present Value (NPV): $211,890
What NPV Means: NPV is an indicator of how much value (wealth) an investment adds to the customer. If NPV is positive then the investment would add value. If NPV is zero or negative then other "qualitative" factors may be of adequate value to justify the project (for example, lengthening a swimming pool season). Net Present Value (NPV) is one way to account for the time value of money. NPV calculates the current value of each future cash flow. For example, $1.00 received two years from now is equivalent to something less today, if it can be invested now at some interest rate. This allows us to "discount" the cash flows (whether positive or negative) that the proposed investment is expected to generate at various times in the future back to their equivalent value today (that is, their "present value"). If one then subtracts the cost of the proposed investment from the sum of the present values of the ongoing cash inflows, one obtains the net present value (NPV) of the investment.
Internal Rate of Return (IRR): 58.2%
Internal Rate of Return (IRR) is a common measure of investment efficiency. Equivalent to the yield to maturity of a bond. The internal rate of return (IRR) is the annualized effective compounded rate of return earned on the invested capital.
Modified Internal Rate of Return (MIRR): 17.6%
Modified Internal Rate of Return (MIRR), as the name implies, is a modification of the internal rate of return (IRR) and as such aims to resolve some problems with the IRR. First, IRR assumes that positive cash flows are reinvested at the same rate of return as that of the project that generated them. A more likely situation is that the funds will be reinvested at a rate closer to the cost of capital. For determining MIRR, we assumed a finance rate of 5.00% and a reinvestment rate of 8.00%.
Measures of Predictability: Using "hurdle rates" Levelized Energy Cost (LEC)
Solar Electric (PV): $0.14 per kWh
Another dimension of concern about a proposed investment is the predictability of its anticipated costs and returns, which requires measures of the uncertainty associated with them. Levelized Energy Cost (LEC) analysis provides us with a "hurdle rate" (the levelized energy cost). LEC is the average lifetime cost of energy produced by a particular system. We can compare LEC to the current utility rate and its expected change in price as time goes on. In this manner one can judge the investment as a "better bet" than utility rates to contain energy costs.
Assessing Option Value: The option value of a proposed investment represents the value of future opportunities that would be made available only if the investment were made. Like the ante in a poker game, the investment may promise no return other than the opportunity to look at the cards being dealt, at which point one can either fold or "exercise the option" by making additional investments in an attempt to win the pot. To realize future value here new investments are not necessarily required to "exercise the options"  ownership is enough. In the case of renewable energy systems in general, there are primarily two opportunities, or options, which may have future value: Property value appreciation, and Renewable energy certificates (RECs or SRECs):
Property Value Appreciation: $131,660
Installing a renewable energy system can result in increased property valuation. The (few) papers on this topic assume that by decreasing utility bills (operating costs) the property owner`s cash flow can accommodate higher loantovalue ratios. In other words, by reducing monthly expenses, a property owner can afford to take on more debt. According to one report by the Appraisal Journal a home`s value can increase by $20,000 for every $1,000 reduction in annual operating costs due to energy efficiency improvements. This assumes a 5% cost of money ($20,000 x 5% interest = $1,000).
Property value appreciation is estimated to be:
$131,660 = 1styear utility savings of $6,583 (posttax) x 20 years
(Note: If system life is expected to be more than 20 years, then 20 years is used.)
The following factors should be kept in mind:
1. The annual savings will not be the same every year. Utility inflation rates, assuming the renewable energy system is grid connected, will alter the annual savings over time  more savings with utility rate inflation, less if utility rate deflation occurs..
2. At some point in the system`s life, its value as a "saleable" asset will start to reduce to zero as the system comes to its end of life.
3. Property valuations are based upon many variables (external factors), many of which are locationspecific and/or contingent upon macroeconomic and microeconomic factors such as interest rates, the economy, new developments, changing lifestyle and living patterns, etc. A property`s value can change by many percentage points as a result of these external factors and one needs to consider the amount of value a renewable energy system may add to a property visavis the overall property`s value.
Renewable Energy and/or Carbon Credits or Certificate (REC or SREC): Renewable Energy Certificates (sometimes called "solar renewable energy credits/certificates"  SRECs, SRECs, or simply RECs) are a new and evolving method to ascribe future financial value to a renewable energy system. RECs represent the bundle of legal rights to the "green" part of each unit of energy produced by a renewable energy system. This green part can be sold for a value, which generates additional revenue for the seller. These certificates can be sold and traded or bartered and the owner of the REC can claim to have purchased renewable energy.
Utility Energy Summary: Electric
Electric Utility Rates  

Current Rate  Post Project Rate  
Southern California Edison Co: Schedule D Domestic Service (Single Family, Reg 6)  Southern California Edison Co: Schedule TOUDTEV Domestic Tiered EV Charging (Single Family, Reg 6)  
Average Cost:  $0.265 per kWh  Average Cost:  $0.041 per kWh 
Tiered Rate:  Yes  Tiered Rate:  Yes 
TimeofUse Rate:  No  TimeofUse Rate:  Yes 
Demand Charges:  No  Demand Charges:  No 
Summary of Utility & New Source Electricity  

Electric by Month (kWh)  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec  Total 
Entered into Software (historical)  
Monthly Use  1,850  1,510  1,855  2,160  1,986  1,524  1,815  2,865  2,775  2,175  1,613  1,175  23,303 
Historical Cost  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0 
Estimated by Software at Current Rates (Includes any planned energy increases)  
Estimated Use  2,036  1,678  2,042  2,340  2,172  1,704  2,001  3,050  2,955  2,362  1,792  1,361  25,493 
Current Cost  $533  $431  $535  $631  $575  $435  $524  $851  $824  $634  $460  $323  $6,756 
Baseline Use after Efficiency and Use Change  1,593  1,277  1,597  1,908  1,728  1,250  1,661  2,550  2,463  1,910  1,345  917  20,199 
Baseline Cost after Efficiency and Use Change  $395  $306  $396  $496  $437  $293  $418  $695  $671  $494  $321  $202  $5,124 
PV Production  (599)  (584)  (811)  (978)  (920)  (950)  (1,022)  (963)  (780)  (655)  (618)  (586)  
Post Project Use  994  693  786  930  808  300  639  1,588  1,684  1,255  726  331  10,734 
Post Project Cost  $39  $31  $35  $37  $35  $24  $32  $52  $53  $45  $33  $25  $441 
Production SelfConsumption Percent: (Nonbypassable charge of $0.02074 per kWh consumed from the grid, net of exports)  
46%  35%  37%  31%  36%  21%  31%  50%  48%  50%  31%  27%  
NetMeter Credit Values: Amounts Accrued and Applied to PostProject Cost  
The Value of Net Meter Credits applied to the Post Project Cost totals take into account the value of annual net excess generation, less any meter fees and minimum bill amounts.  
Value Accrued in Month at Utility Retail Rate less Nonbypassable charges of $0.02074 per kWh:  
$(2)  $(23)  $(46)  $(59)  $(59)  $(109)  $(147)  $(62)  $(1)  $0  $(24)  $(23)  $(555)  
Value Applied  $0  $0  $0  $0  $0  $0  $0  $0  $0  $(14)  $0  $0  $(14) 
Electric Utility: Tiered Pricing Attributes
Tiered electric rates change based upon how much electric energy (kWh) is purchased. The graph below displays the energy (kWh) portion of your electric bill by Tier. Costs shown assume retail energy (kWh) rates. Actual amounts will be different depending upon meter fees, taxes, netmeter credit methods and other billing specifics. See "Utility Energy Summary: Electric" for total estimated bills.
TimeOfUse (TOU) electric rates change based upon when (the hour) electric energy (kWh) is purchased or credited ("sold") to the utility. The graph below displays the energy (kWh) portion of your electric bill by TOU.
Winter & Summer TOU Patterns: Here is how electric use is distributed across a typical day.
Utility Energy Summary: Natural Gas
Natural Gas Utility Rates  

Current Rate  Post Project Rate  
Fixed Price per unit $0.0000 per Therm  Fixed Price per unit  
Tiered Rate:  No  Tiered Rate:  No 
Summary of Utility Natural Gas & New Source Energy  

Natural Gas by Month (Therm)  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec  Total 
Entered into Software (historical)  
Monthly Use  0  0  0  0  0  0  0  0  0  0  0  0  0 
Historical Cost  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0 
Estimated by Software at Current Rates  
Estimated Use  0  0  0  0  0  0  0  0  0  0  0  0  0 
Current Cost  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0 
Post Project Use  0  0  0  0  0  0  0  0  0  0  0  0  0 
Post Project Cost  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0  $0 
Minimum monthly meter fees may apply and are not included in this analysis.
Cash Flow Details for the System
Cash Flows in Year  0  1  2  3  4 

Gross Cost: Efficiency  0  
Gross Cost: PV  (28,145)  
Gross Cost: TOTAL  (28,145)  
Reference: Utility Bill Savings with Inflation Applied  0  6,583  6,861  7,152  7,453 
Utility Bill Savings as Gross Income Dollars  0  10,618  11,066  11,535  12,021 
Solar Electric (PV) Incentives  
Federal Tax Credit (30% of Gross Cost at Installation)  8,444  0  0  0  0 
Total Incentives  8,444  0  0  0  0 
Net Annual Cash Flow  (19,701)  10,618  11,066  11,535  12,021 
Cumulative Cash Flow  (19,701)  (9,083)  1,983  13,518  25,539 
Net Annual Cash Flow is the sum of values in gray lines.
Cash Flows in Year  5  6  7  8  9 

Reference: Utility Bill Savings with Inflation Applied  7,768  8,096  8,438  8,794  9,166 
Utility Bill Savings as Gross Income Dollars  12,529  13,058  13,610  14,184  14,784 
Net Annual Cash Flow  12,529  13,058  13,610  14,184  14,784 
Cumulative Cash Flow  38,068  51,126  64,736  78,920  93,704 
Cash Flows in Year  10  11  12  13  14 

Reference: Utility Bill Savings with Inflation Applied  9,553  9,956  10,377  10,815  11,271 
Utility Bill Savings as Gross Income Dollars  15,408  16,058  16,737  17,444  18,179 
Net Annual Cash Flow  15,408  16,058  16,737  17,444  18,179 
Cumulative Cash Flow  109,112  125,170  141,907  159,351  177,530 
Cash Flows in Year  15  16  17  18  19 

Reference: Utility Bill Savings with Inflation Applied  11,747  12,243  12,760  13,299  13,861 
Utility Bill Savings as Gross Income Dollars  18,947  19,747  20,581  21,450  22,356 
Net Annual Cash Flow  18,947  19,747  20,581  21,450  22,356 
Cumulative Cash Flow  196,477  216,224  236,805  258,255  280,611 
Cash Flows in Year  20  21  22  23  24 

Reference: Utility Bill Savings with Inflation Applied  14,446  15,056  15,692  16,355  17,045 
Utility Bill Savings as Gross Income Dollars  23,300  24,284  25,310  26,379  27,492 
Net Annual Cash Flow  23,300  24,284  25,310  26,379  27,492 
Cumulative Cash Flow  303,911  328,195  353,505  379,884  407,376 
Cash Flows in Year  25  26  27  28  29 

Reference: Utility Bill Savings with Inflation Applied  17,765  0  0  0  0 
Utility Bill Savings as Gross Income Dollars  28,653  0  0  0  0 
Net Annual Cash Flow  28,653  0  0  0  0 
Cumulative Cash Flow  436,029  0  0  0  0 
Other Assumptions Used in this Analysis
Customer Type: Residential.
Tax Effects Applied to Utility Savings: As a residential customer, we have assumed Pretax (gross income) dollars are saved. This means the Utility Savings are divided by 1 minus the effective income tax rate (28.00% federal and 10.00% state).
System Life: PV System: 25 years. Inverters: 25 years. Appliance/Lighting: 10 years.
PV System Modeling Variables (PVWatts references): System Losses: 7%, DCtoAC Ratio: 1.19, Module Type: Standard, Inverter Efficiency: 96.00%. Software`s suggested production adjusted by 91% for this estimate.
Performance Degradation and O&M Costs: We have assumed performance will degrade by 1.00% per year due to soiling and general wear. Annual operating and maintenance (O&M) costs are inflated 2.80% per year, and are estimated as a percent of gross system price, as follows: Solar Electric (PV): 0.00%. Efficiency measures: None.
Income Tax Rates: Federal: 28.00%, State: 10.00%
Annual Inflation Rates: Consumer price index: 2.80%, Electric Rates: 4.25%, Natural Gas Rates: 3.78%
Energy Metering Type: Net Metering
Net Excess Generation (NEG): Monthly NEG credited at Utility Rate less Nonbypassable charges of $0.02074 per kWh, which also apply to energy produced and not selfconsumed (fed to grid). Monthly NEG may be carried forward to the next month for application to future utility bills. Annual NEG sold at $0.06000 per kWh.
Discount Rate: 5.00%. Used to estimate net present value of future cash flows. This is also assumed to be the finance rate, as used to calculate MIRR.
Reinvestment Rate: 8.00%. Used to calculate MIRR.
Carbon Dioxide (CO2) Calculations: The following assumptions are used to calculate carbon dioxide (CO2) reductions: Electricity: 1.64 lbs. CO2 per kWh. Natural Gas: 0.12 lbs. CO2 per cubic foot (12 lbs. per Therm). Fuel Oil: 22.29 lbs. CO2 per gallon. Propane: 12.17 lbs. CO2 per gallon. Trees Planted: 0.0429 tons CO2 per Tree planted (23.3 Trees/Ton CO2). Automiles Saved: 1 lb CO2 per mile for medium passenger car (2,000 Miles/Ton CO2). Gallons Gasoline: 0.009812 tons CO2/gallon (102 Gal/Ton CO2). Landfill Tons: 3.16 tons CO2 per ton of waste recycled instead of landfilled. Singlefamily Homes (electric use): 8.82 tons CO2/home (0.11 Homes/Ton CO2). Tons of Coal Burned: 2.0525 lbs. of CO2 per lb. of Coal (2,000 lbs. per ton). Source: www.epa.gov/cleanenergy/energyresources/refs.html
Water used by Thermoelectric Powerplants: Depending upon the technology used, natural gas and coal power plants withdraw up to 20 gallons of water for every kWh of energy produced and consume (via evaporation) about 0.47 gallons per kWh produced. Sources: http://nrel.gov/docs/fy04osti/33905.pdf and http://www.wri.org/resources/chartsgraphs/typicalrangewaterwithdrawalsandconsumptionthermoelectricpowerplants which summarizes the Electric Power Research Institue`s report Water & Sustainability (Volume 3): U.S. Water Consumption for Power Production  The Next Half Century
PV Production by Year
PV system production will vary according to weather patterns, changes in obstacles that may shade the PV panels, and the like. Over time system production may also "degrade" due to general soiling and other effects of aging. The table below provides a range (+/ 20%) of typical annual production values for the system, by year, with an annual performance degradation of 1.00% included. The "Typical" values were used to provide this report.
Year  Low Typical  Typical  High Typical 
1  7,572 kWh  9,465 kWh  11,358 kWh 
2  7,496 kWh  9,370 kWh  11,244 kWh 
3  7,421 kWh  9,276 kWh  11,131 kWh 
4  7,345 kWh  9,181 kWh  11,017 kWh 
5  7,269 kWh  9,086 kWh  10,904 kWh 
6  7,193 kWh  8,992 kWh  10,790 kWh 
7  7,118 kWh  8,897 kWh  10,677 kWh 
8  7,042 kWh  8,802 kWh  10,563 kWh 
9  6,966 kWh  8,708 kWh  10,449 kWh 
10  6,891 kWh  8,613 kWh  10,336 kWh 
11  6,815 kWh  8,519 kWh  10,222 kWh 
12  6,739 kWh  8,424 kWh  10,109 kWh 
13  6,663 kWh  8,329 kWh  9,995 kWh 
14  6,588 kWh  8,235 kWh  9,881 kWh 
15  6,512 kWh  8,140 kWh  9,768 kWh 
16  6,436 kWh  8,045 kWh  9,654 kWh 
17  6,360 kWh  7,951 kWh  9,541 kWh 
18  6,285 kWh  7,856 kWh  9,427 kWh 
19  6,209 kWh  7,761 kWh  9,314 kWh 
20  6,133 kWh  7,667 kWh  9,200 kWh 
21  6,058 kWh  7,572 kWh  9,086 kWh 
22  5,982 kWh  7,477 kWh  8,973 kWh 
23  5,906 kWh  7,383 kWh  8,859 kWh 
24  5,830 kWh  7,288 kWh  8,746 kWh 
25  5,755 kWh  7,193 kWh  8,632 kWh 
Totals  166,584 kWh  208,230 kWh  249,876 kWh 
The following renewable resource assumptions were used to develop estimates for the project location. These are typical values based upon observed data over several decades. Actual values (and system performance) will vary from month to month, and from year to year, in accordance to weather and climate pattern changes.
Weather station referenced: "JACK NORTHROP FLD H" (California)
Solar Resources: FlatPlate, Southfacing Tilted at Latitude  

Month  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec 
kWh/m2/day  4.752  4.822  5.725  6.816  5.937  6.328  6.75  6.589  5.792  4.849  5.111  4.743 
Ambient Temperature Data (Typical °F)  

Month  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec 
Mean °F  56  58  58  59  61  66  69  68  68  64  63  57 
Max °F  81  75  77  82  73  81  84  96  93  77  90  81 
Min °F  43  46  45  48  52  54  61  54  21  51  48  30 