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Sam is the co-founder and COO of Aurora Solar.


Samuel Adeyemo

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Sam is the co-founder and COO of Aurora Solar.

Recent Posts

Want to Boost Your Solar Sales in 2020?  You Better Learn to TALC

Posted by Samuel Adeyemo on Mar 12, 2020 10:30:00 AM

If you have been selling residential solar for the past few years, you have probably been taught that uncovering a customer’s pain points is the key to closing the deal. Specifically, you have likely mastered the art of turning a homeowner’s sticker shock over their utility bills and fear of losing control over the cost of their electricity, into a case for going solar. It was a simple and effective tactic: all you had to do was convince the homeowner that solar would make the pain go away, and you would walk out with your signed contract in hand.

In many cases, this message still works: Homeowners still often face the pain of high electric bills, and if you are selling solar plus storage in the right regions, they may still be reeling from the pain of persistent power outages. However, if you find that selling based on pain is no longer as effective as it used to be, you are not alone, and you should keep reading.

Solar buyers today are more savvy and more cost-conscious than ever before. “It has turned into a mature business” says Trevor Wright, Director of Sales at Semper Solaris, a SPW 2019 top 10 residential solar contractor. “For the most part [prospects] know what solar is, [and] you’ve got a much smarter buyer now. The low hanging fruit [...] most of them have already bought.”

This is a new solar market, and the competition for customers is brutal. If you manage a large team of sales reps, things are even worse - because of high employee turnover and an increasingly competitive job market for the best reps, it’s a constant struggle to keep your team happy. This is one of the reasons why sales reps are among the hardest roles to fill in the solar industry.

Source: 2019 National Solar Jobs Census.

So what do you do if you are a successful closer who is looking to maintain your edge and elevate your solar sales to the next level in 2020? Or what if you are a sales leader, trying to grow your company from tens to hundreds of millions of dollars in revenue?

From my conversations with some of the most successful sales organizations in solar, to thrive in this environment, I suggest that you ditch a sales strategy based on buyer pain, and learn instead to adopt a strategy of TALC - Teach, Ask, Listen and, of course, Close your leads.

Learn How Semper Solaris Uses Aurora to Grow & Drive Profitability. Watch our Webinar: Unlocking Modern Solar Sales: How Top Teams Use Software to Win

TEACH

Assuming you already have a qualified lead, the best first step in the sales process is to teach the homeowner about what solar means for their home. I’m not talking about rattling off generic facts about modules - they already have that information from Google (and from your competitors). I’m talking about building an engaging, interactive, educational experience - one that is tailored just for your homeowner. At Aurora, we have built a number of tools to help you deliver this experience. My personal favorites are: the Consumption Profile tool, which makes it easy to explain complex concepts like time-of-use rates, and the solar Sun Path, which helps to show which roof surfaces are getting the most sunlight. Whether you do this at the kitchen table or over the Internet, having an interactive, visual experience will make you stand out from the competitor who just sent the customer a page with some poorly placed panels and pricing.

With the Aurora Consumption Profile tool, you can create an accurate electric consumption based on your customer's electricity bill and location, then show them the impact of their pool, lighting or even their EV. 

ASK

Now that you have established yourself as a trusted advisor, don’t be afraid to ask open-ended questions to get the customer talking about themselves, their hopes in going solar, and their concerns. Start off by asking the gentler “pronoun” questions - these are questions that start with “What” or “Who”, and as you build trust, move towards the harder, interrogative questions, “Why”, “When”, or “Where”. The best sales reps ask about a customer’s objections to surface them at the beginning so they can listen to the response and address the customer’s concerns and provide satisfactory answers.

Elliot Goldstein, an Account Executive used this technique to consistently top the leaderboard at a leading solar installation company. “The goal here is to get the customer to reinforce the reasons they are making this decision (without you having to bring up pain)”, says Elliot. “For example, ask if they would be okay with the look of solar on the front of their house. What is the possibility of moving? Lean into hard questions to distinguish yourself as a trusted advisor.”

Again, it is critical that you have an interactive process in case they ask you questions that you hadn’t fully prepared for. A classic example is “I don’t like the panels on the front of the house”. An in-app simulation makes it easy to show the customer the economic effect of that decision.

Aurora's energy performance simulation makes it easy to show the customer in real-time the economic effect of any decision, such as placing panels on the front of the house.

LISTEN

When asking your questions, actively listen to what your customer is telling you. The best sales reps will pick up on pitch, tone and other cues that indicate if the customer fully understands the value solar provides, or if instead they need more time to make a big decision. How do they react when you tell them the price? Or when you ask them to compare the pros and cons of buying with cash vs. loan or lease? Make sure you truly understand all of their questions and that you answer them adequately - it costs too much money for you to get this far without you feeling confident that they are definitely buying from you.

CLOSE

An experienced solar sales rep also knows that just getting the homeowner to sign is not the finish line. After all, if you have Taught, Asked and Listened like you should have, you would think that it’s just a formality to get them to Close right there and then. However, due to the industry’s high project cancellation rates and change orders, many solar sales reps still don’t earn their commission until the system is installed and the customer is satisfied.

In my experience, the best way to avoid cancellations or change orders is to make sure that you sell to the homeowner something that they want, and something that your company can actually deliver on. This means that the homeowner feels as good about their decision after you leave as they did while you were in the home or on the call.

It also means that you haven’t created a bad design which your operations department or installer will kick back. Common mistakes sales reps make include placing solar panels over fire code setbacks, chimneys, and other design errors. Fortunately, Aurora Secure Mode makes it possible to foolproof your sales process and reduce the risk of design errors while simultaneously enabling the sales person to personalize the site design. (Quick aside - when I talk to sales leaders about giving everyone access to Aurora, I get a combination of delight and fear: everyone loves what we have built, but many are also worried about what could happen if they let their sales team access the project site models. We have you covered—our new feature, Secure Mode, lets you restrict your team from altering trees, buildings or other aspects of the site model).

Learn How to Put Secure Mode to Work for Your Organization.

CONCLUSION

2020 promises to be one of the most competitive years for solar yet. Your buyer has more information than ever before, including already knowing that solar will reduce their bills. The major question in their mind is why should they go with you. To close them, I suggest you start to TALC. It is the secret to some of the fastest growing, profitable companies in solar today, and will help you take your sales to the next level.

Topics: Solar Sales

What Are Time of Use Rates? Your TOU Guide

Posted by Samuel Adeyemo on Oct 29, 2019 9:00:00 AM

What do the prices of movie tickets to Hollywood’s latest blockbuster and the cost of electricity in California have in common? First, in most theaters, you will find that ticket prices change based on the time of day you want to see your show. This is similar to electricity rates in California (and other areas), where the cost of energy varies based on the time of day it is consumed (an approach known as time of use rates — or TOU rates).

Second, even for a specific time (take a matinee for example), movie tickets often cost less for different types of consumers. Students and seniors pay less for their tickets than others do. We see a similar phenomenon in California where for a given time period, consumers who use less than a baseline amount of energy, will pay less than those who use more than the baseline amount of energy, even if it is for the exact same time of day. The illustration below shows how California’s Pacific Gas and Electric (PG&E) utility varies the cost of energy based on time of day and cumulative consumption.

In this article, we focus on the first of these energy rate factors, where the cost of energy varies according to the time of day it is consumed. In other articles, we look at how rates vary based on level of energy consumption, how utility rate changes affect the returns for solar customers, and how you can optimize your designs to maximize savings under different rate types.

An example of a time of use rate (TOU rate) with electricity peak hours and off-peak hours that have different prices
Figure 1: A diagram of a PG&E time of use rate (E-TOU option A) during the summertime. Source: www.pge.com.

What Are Time of Use Rates (TOU Rates)?

Time of use rates are a type of electricity rate used by some utilities for billing customers. Under a TOU rate, customers pay different prices per kilowatt hour (kWh) of electricity that they use, depending on when they use it. Pricing varies by time of day, and can also vary based on the day of the week (weekend or weekday) and the time of year. 

TOU rates are characterized by different prices between “peak hours” and “off-peak” hours; some rates also have other intermediate price periods as well. 

TOU rates can apply to both residential and commercial customers. The exact details of a customer’s TOU rate will depend on the specific rate plan offered by their electric utility. 

What Are Peak Hours?

Electricity costs more during certain designated “peak hours” for customers on a time of use rate plan. These hours are typically selected to coincide with the times when the demand for electricity is greatest (often in the afternoon/evenings and the summertime). For example, California utility San Diego Gas & Electric (SDG&E) has peak hours from 4 - 9 pm.

One reason for peak pricing is because utilities must have additional energy generation resources available to meet the needs of the grid during limited times when energy demand is highest. By pricing electricity higher during times that typically have the highest demand, TOU rates are intended to provide price signals that encourage customers to shift their energy usage to other periods. 

What Are Off-Peak Hours? 

Off-peak hours are the hours under a time of use rate plan when electricity is less expensive. For customers that can shift some of their energy-using activities—like running the washing machine or charging an electric vehicle—to these off-peak hours, the savings can be significant. We’ll look at an example of this in the case study below.

How Common Are TOU Rates? Where Are They Used?

California is among the first states to make this type of utility rate structure mandatory for customers. In 2019 and 2020 most residential customers will be transitioned to TOU plans. All commercial, industrial, agricultural customers are already required to be on one. 

California is not alone, however. In 2014, the Massachusetts Department of Public Utilities adopted default time of use rates for residential customers which went into effect in 2015. The Tennessee Valley Authority, the nation’s largest federally-owned electric utility which serves nine million customers in Tennessee and other southern states, has also explored transitioning to TOU rates.

Time-variable rate programs are already offered on a voluntary basis in nearly every state. In early 2019, Ahmad Faruqui, Principal at the Brattle Group, told Utility Dive that “About half of U.S. investor-owned utilities have optional time varying rates for residential customers," and that new programs are being tested or talked about in at least ten states. 

Although participation in voluntary TOU programs has been low to date, as many states consider efforts to modernize the electrical grid and reduce peak energy consumption, TOU rates (and other related time-based rate structures) may become increasingly prevalent. There are multiple approaches that utilities take when it comes to time-varying energy costs, but TOU rates are one of the most common.

Understanding TOU Rates in Practice: A Case Study

Let’s take a look at a case study of two households to get a more complete picture of the impact of a time of use rate plan. Using the modeling tools in Aurora’s solar design and sales software, we can better understand how TOU rates affect customers’ bills.  

That’s because, with the input of the customer’s bill amount or kWh energy usage, Aurora’s Consumption Profile tool can model the customer’s energy consumption patterns throughout the day and year (their “load profile”) based on the characteristics of the home and weather data (pulled automatically from local weather stations). 

Note: Aurora’s consumption profile is just one of many tools we offer
to help solar contractors get a complete picture of their customers’
energy usage and design the optimal PV system with ease. 

Sign up for a demo to learn more about these features and see them in action.

In this example, we’ll take a look at a time of use rate from PG&E: E-TOU A, a residential plan.1  In Figure 1, you can see that the cost of energy is higher between 3pm - 8pm on weekdays than during any other time. During a weekday in summertime, as of March 1, 2017, rates range from $.317/kWh, to $.393/kWh. That is almost a 25% variation between the lowest and highest cost energy!

Household A lives in Bakersfield, CA. We used Aurora to model the customer’s load profile based on typical hourly summertime energy consumption for a house in Bakersfield. According to U.S. Climate Data, Bakersfield temperatures range between 64 and 97 degrees in the summertime. Consequently, Aurora by default generated a load profile where air conditioning was a large portion of Household A’s energy consumption (see Figure 2). Unfortunately for this household, about 43% of their summertime energy consumption occurs during the time when electricity is most expensive (peak hours).

Customers’ load profiles (consumption during electricity peak hours vs. off-peak hours) affects their bill amount under a time of use rate
Figure 2: A load profile for a house (“Household A”) in Bakersfield, CA generated automatically in Aurora.

Now let’s consider Household B, also located in Bakersfield, CA. In this case, instead of using Aurora to automatically generate a typical load profile, we obtained actual measured interval data (Green Button data) for a house in Bakersfield from PG&E. We uploaded this into Aurora, which generated the load profile below.

This homeowner has an electric vehicle (a Tesla) which they drive about 20 miles per day and charge at night (off-peak hours). Because of their usage patterns,  only about 10% of their energy consumption occurs during the 3pm - 8pm peak hours.

This customer uses most of their electricity during off-peak hours leading to a lower TOU rate bill Figure 3: Load profile for a house (“Household B”) in Bakersfield, CA generated in Aurora, based on uploaded interval (Green Button) data.

If you’ve been following along, your intuition would suggest that for the same energy consumption, Household A should have a higher electricity bill than Household B, because they are consuming more energy during peak hours. Before we evaluate the financial implications of time of use rates, here’s a quick recap the two households’ information:

  Household A Household B
Location Bakersfield, CA Bakersfield, CA
Utility Rate PG&E, E-TOU A - Residential TOU Region W PG&E, E-TOU A - Residential TOU Region W
Energy Consumption (July) 1,873 kWh 1,873 kWh
% of weekday consumption during peak hours (3pm-8pm) 43% 10%

Running Aurora’s utility bill calculator, we find that Household A (high peak consumption) had a bill of $591 for the month of July. We find that Household B (low peak consumption) had a July bill of $561. So despite consuming the exact same amount of electricity, Household A’s bill was about 5.5% higher in July than Household B.

pre- and post-solar bills for Household A on TOU rate
Figure 4: Household A’s July electric bill is $591.

pre- and post-solar bills for Household B on TOU rate
Figure 5: Household B’s July electric bill is $561.

Does this make sense? Mathematically, we can get a rough estimate of how much of a difference TOU rates should make in electricity bills with a simple formula:

TOU Bill Difference = (DaysTOU/7) * (ConsumptionpeakA- ConsumptionpeakB) * (URpeak - URoffpeak) / URoffpeak

Equation 1: Rough estimate of the TOU effect on energy bills.

Let's plug some numbers into Equation 1.

Term Definition Value
Days TOU Days of the week that TOU values apply 5*
Consumption_peakA Energy consumption (kWh) during peak hours for household A 43%
Consumption_peakB Energy consumption (kWh) during peak hours for household B 10%
UtilityRate_peak Peak period utility rate ** $.393/kWh
UtilityRate_offpeak Off peak period utility rate** $.317/kWh

*TOU rates in this region only apply to weekdays
** For simplicity we are assuming that this is for the above baseline energy consumption

TOU Bill Difference = (5/7) * (43%-10%) * (.393- .317) / .317= 5.64%

You can see our quick estimate came pretty close to the actual difference between Household A’s (high peak consumption) and Household B’s (low peak consumption) energy bills. (In this related article, we extend this case study to consider how increasing the total amount of energy consumed affects energy bills.)

Key Takeaways:

  • Like the prices of movie tickets, under time of use rates, the cost of electricity varies based on the time when you use it.
  • California tends to be a bellwether for the U.S. solar energy market; TOU  rates are already available on a voluntary basis in almost all states and utilities are increasingly considering their expansion as a means to reduce peak energy demands, so it is a good idea to understand how they work.
  • For solar customers in TOU areas, understanding these rates is particularly important because TOU rates affect solar savings. Modeling software can help contractors provide accurate savings estimates for customers.
  • You can use the following simple formula to calculate how much of an impact the difference between high-cost electricity and low-cost electricity has on a homeowner’s bill:
  • TOU Bill Difference = (DaysTOU/7) * (ConsumptionpeakA- ConsumptionpeakB) * (URpeak - URoffpeak)/URoffpeak*

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Editor's Note: This article was originally published on March 21, 2017. It was updated in October 2019 for freshness, accuracy, and comprehensiveness.

1 Note that this case study uses the version of the PG&E E-TOU A rate plan that was in effect as of March 1, 2017. While energy charges under this rate have changed, the peak and off-peak time periods remain the same at the time this article was updated in October 2019. (The current TOU-A rate plan can be found here). 

Cover photo credit: NREL/DOE.

Topics: Solar Utility Bill

NABCEP Leaders Discuss Solar Credentials and Industry Trends

Posted by Samuel Adeyemo on Jun 6, 2018 10:00:00 AM

If you work in the solar industry, chances are you’ve heard of NABCEP—the North American Board of Certified Energy Practitioners. NABCEP is a nonprofit professional certification board and credentialing organization that offers some of the most widely recognized and respected certifications for solar professionals. It seeks to promote consumer confidence and quality assurance by guaranteeing that certified practitioners have met minimum levels of education and experience, passed a rigorous competency exam, and abide by a code of ethics.

Earlier this year, Aurora’s Co-founder and COO, Samuel Adeyemo, had the pleasure of talking with NABCEP Executive Director Shawn O’Brien and members of his team at the 2018 NABCEP Continuing Education Conference in Niagara Falls, New York. The interview explored the role of NABCEP, how their programs are changing, recent solar industry developments, and more. We’re excited to share that conversation with you today.

Shawn_O'Brien_headshot_LINABCEP Executive Director Shawn O'Brien

[Note: This interview has been edited for brevity and clarity.]

How do you envision NABCEP certification impacting the evolution of the solar industry?

Shawn O’Brien, NABCEP Executive Director: I see NABCEP helping to ensure that the quality of solar installations and the maintenance of systems continues to improve. That includes helping to ensure people have quality experiences with the solar industry from point A to point Z, from a homeowner’s first interaction with a salesperson to the completion of their installation.

I also see NABCEP helping to improve safety in the solar industry by making sure that those doing the work—installing, maintaining, etc.—have some type of credential that confirms they know what they're doing and can do it in a safe and effective way.

We would also like to make our certifications available internationally. We want our programs to be able to help communities beyond North America. This is something we started back in November and December of 2017 with the expansion of our PV Associate program. We now have approved trainers in Saudi Arabia and India, and are working with folks in Dubai and Jordan for our company accreditation program.

Finally, a major vision for our work is to really enhance career development for professionals in the industry. I like that being a solar installer is not just a role anymore, it's an occupation, a career path for individuals working in the industry. We're very interested in helping them along that career path and advancing their journey.

For those unfamiliar with NABCEP’s credential programs, can you talk a little about how your programs are designed?

Shawn O’Brien: Something to note about NABCEP’s certifications is that NABCEP doesn't prescribe the requirements. We look to subject matter experts, members of the profession, to tell us what they're doing in their work and how important certain skill sets are for a given role.

To evaluate this, we use what we call a Job Task Analysis. It's a tried and true way of identifying the competencies needed to do a job. We send that out to the profession with a list of skills and say, “How important is it that someone who's going to be, for instance, a PV Technical Sales Professional, can do this skill and how critical is it that they do it right?” We analyze all of the data we get back, and based on that we design our certification programs to test for the skill sets that are needed.

What is some feedback you've received about how NABCEP certification benefits solar professionals?

Dan Pickel, NABCEP Program Manager: We require quite a bit of training. One of the main themes we hear in our conversations with solar professionals who pursue our certifications is that a lot of times they go into the process thinking that they already know everything they need to know based on their experience in the industry. However, in talking to them after they complete the training and certification exam, they report that they really come out knowing more, being more versatile in the field, and having a broader sense of PV installation work.

Even people who fail the exam often report that they've learned and grown a lot from the process. It's a tough exam; we want to make sure that if someone passes this exam they really have the necessary knowledge and can translate that knowledge into skills in the field.

What are some interesting recent developments NABCEP has observed in the solar industry; how are those developments impacting NABCEP’s programs?

Dan Pickel: One of the things we’ve noticed is that there has been more specialization within the industry in recent years. Solar professionals tended to have a lot of diverse skills. There were more jack-of-all-trades roles at smaller mom-and-pop installation companies, where they did everything from A to Z—running the company, doing installations, maintenance, etc. But as the industry has grown, we've realized that specialization has become more common.

As a result, NABCEP has developed some new certifications. We now have PV Design Specialist, PV Installer Specialist, and Commissioning & Maintenance Specialist certifications. These three specialty certifications were developed with the input of subject matter experts using our Job Task Analysis approach. We believe these specialty certifications will offer a lot of value to solar professionals as a way to advance their careers, whether they are looking for a bump in their salary, to transition into a more senior role, or to open their own firm.

Shawn O’Brien: More broadly, two of the major industry trends we’re seeing are increased focus on Operations and Maintenance (O&M) and energy storage. The O&M part we have addressed through our new Commissioning & Maintenance Specialist certification that Dan mentioned. Energy storage, and whether there is a need for a specialist certification in that area, is something NABCEP will be exploring this year and in early 2019.

Enjoyed this article? Subscribe to the Aurora Blog for our latest updates! 

Topics: Solar Spotlight

Changing Change Orders: Tackling Solar’s Dirty Little Secret

Posted by Samuel Adeyemo on May 2, 2018 9:00:00 AM

Regular readers of this blog will know that we recently launched an integration with Nearmap, a provider of high definition aerial imagery. Integrating with Nearmap offers many benefits to solar installers, including allowing them to accurately design PV systems and to impress their clients with the crisp imagery in their proposal. As Nearmap CEO Dr. Rob Newman mentioned in a recent blog article, Nearmap “capture[s] the truth on the ground… [with] camera systems in planes flying over approximately 400 cities in the U.S. capturing highly accurate aerial imagery.”

As excited as the industry has been about the sales benefits of high quality imagery, little attention has been paid to the economic impact of its potential for reducing change orders.  A change order is defined as “a written order from the owner, architect, engineer, or other authorized person to depart from previously agreed upon plans and specifications for construction.”

In tangible terms, a change order can range from moving modules from one part of the roof to another because the customer had a change of heart, to realizing that you cannot fit as many modules on the roof as you wanted to due to obstructions you could not see on the roof.

For a term that is commonly used in the industry, there is precious little research that has gone towards quantifying the effect of change orders. A search of NREL’s website and database of publications does no more than acknowledge they exist and are important to manage, while looking through the archive of solar industry publications fails to unveil any research. Given that change orders are largely within the control of the solar installer, could it be that the solar community is unwilling to acknowledge that some of our own processes are the biggest impediment to our own success?

If so, it is time to talk about the industry’s dirty little secret if we are to have a hope of changing things.

To help us assess the significance of change orders, we conducted a simple poll of solar professionals who attended a recent Aurora webinar, which yielded responses from 107 individuals. The job functions of the survey group ranged from designers to salespeople and from c-level suite executives to entry-level employees.

percent of solar projects that require change orders, based on a recent poll of solar professionals

As we suspected, change orders are pervasive in the industry. Of 76 individuals who responded to our question about how prevalent change orders are at their companies, 47% reported that change orders impact between 10 and 30% of their projects. Nearly 7% of respondents indicated that change orders are needed for over half of their projects.

What about the financial impact of change orders?

It is important to note that not all change orders are created equal. Pey Shadzi, Operations Manager at Cosmic Solar, a family owned installation company in Southern California, explains that “a change order can range from a major redesign of the installation after the deal has gone into contract to a slight modification as the customer is evaluating different options.” Shadzi notes that, for Cosmic Solar, change orders typically involve only minor changes such as slight adjustments based on customer input.

To help account for the range of change order types, we looked at how much a change order costs. We assumed that a smaller modification would cost very little, whereas a significant redesign could run thousands of dollars.

Average cost of a change order on a solar project, based on results of a recent poll of solar industry professionals

While the greatest number of respondents (34%) indicated that their change orders cost on average less than $250, a similar number (31%) indicated that change orders can cost up to $750. Twenty-one percent of respondents reported that their average change orders cost between $750 and $1250. Thirteen percent reported change orders costing as much as $1750. A weighted average1 generated from these results yielded an average change order cost of $583.

A lot of change orders are not within the installer’s control. Anecdotally, a customer changing their mind is a frequent cause of change orders. However, there are a lot of factors that the installer can control. Victor Ionin, a customer success specialist with Aurora, notes that many change orders result from a solar designer missing something about the site. 

How solar installers assess a project site for its solar potential (in person, remote site assessment, or a combination)

In our survey results we found that 88% of solar installers perform some degree of remote system design—meaning that they use some form of imagery in the development of their proposed solar PV system. It stands to reason that the more accurately that imagery communicates the conditions of the project site, the less likely they will have to change the design in the future.

This is where HD imagery comes into play; being able to get accurate measurements ensures that you will not over or underestimate the number of solar panels that can fit on a client’s roof. Crisp imagery allows Aurora’s computer vision algorithms to more accurately detect all the obstructions on a roof. Again, this allows solar installers to accurately forecast how many modules will fit on their roof, helping to reduce change orders.

Pey Shadzi remarks that using Aurora design software helps Cosmic Solar minimize the occurrence of change orders “because it allows us to measure the roofs with more accuracy. This allows us get our customers’ systems up-and-running sooner than if we had to make a change.”

Sign up for a free consultation to see how Aurora's design tools can help you  reduce change orders!


1. Because respondents answers provided a range of costs that their change orders typically fall within, rather than exact costs, the weighted average was generated by randomly generating specific values for each respondent within the cost range they had specified. These values provided a basis from which to create a weighted average.

 

Topics: solar design

The Importance of Discounting Future Solar Savings

Posted by Samuel Adeyemo on Nov 15, 2017 9:30:00 AM

[This article was originally published in SolarPro .]

On May 7, 2016, Pearlie Mae Smith, the winner of the New Jersey Lottery Powerball, had an enviable decision to make: Should she accept $429 million in payments over 30 years or accept a smaller amount, $284 million, up front? Though it was 34% lower, Ms. Smith chose the up-front payment. While Ms. Smith was more than 70 years old at the time she won the Powerball, her choice was not unique. Powerball data show that all five winners in 2016 chose the up-front payment versus taking payments over time, forfeiting more than a third of their nominal earnings.

Going back as far as 2003, you will find cases where Powerball winners were willing to sacrifice half their winnings to claim them up front versus spreading them out over time. If sacrificing almost half of one’s nominal winnings in exchange for an up-front payment does not sound totally crazy, you already have an intuitive understanding of the concept of the time value of money, also known as discounting.

Time Value of Money

The time value of money means that a dollar promised at a future date is worth a discounted amount compared to a dollar guaranteed today. This is because there is no guarantee that whoever promised you the dollar will be around or will deliver it in 25 years. Even if the person does deliver the dollar, due to inflation, it will not buy as much in 25 years as it does today. In addition, if you get a dollar today, you can invest it and grow that dollar over time. For all of these reasons, money promised in the future is worth less than money guaranteed today.

Discount rate. In the context of solar, the value of electric bill savings in the future should be similarly discounted relative to cash in hand today. The amount that a dollar in the future is discounted relative to a dollar today is referred to as the discount rate, which the American Heritage Dictionary defines as “the interest rate used in determining the present value of a future payment or series of payments.” In plain English, this is the rate of return at which it makes no difference to you whether you receive the payment today versus sometime in the future.

For the mathematically inclined, you can calculate the discount of future to current savings using the following formula:

Discount Rate Formula: d=(S sub n divided by S sub zero to the power of 1 over n minus 1) where d is the discount rate, Sn is the savings in year n, S0 is the current value of these savings and n is the year of evaluation. The discount rate is typically expressed as a percentage.

Modeling Financial Returns

If you are not applying a discount rate, or if the software you are using does not do so, you are likely misrepresenting the financial returns of going solar. You may also be making suboptimal solar design decisions or recommending the wrong financing option to your client. Let us examine what the application of a discount rate does to some of the more commonly quoted solar financial metrics—lifetime savings, internal rate of return (IRR), levelized cost of energy (LCOE), and payback period—across two financing options: cash and loan-financed purchase.

Model of a house created in Aurora, showing irradiance map of the roof, system design, and projected energy production. Aurora estimates that the 10 kW array shown here has a weighted total solar resource fraction of 86% and will generate 12.85 MWh of energy in year 1.

Figure 1. Aurora estimates that the 10 kW array shown here has a weighted total solar resource fraction of 86% and will generate 12.85 MWh of energy in year 1.

Case study. For this example, I used Aurora both to design the 10 kW system in Figure 1 and to perform the financial analysis. The case study assumes the following: The customer is on PG&E’s E-1 baseline utility rate for Region S; the assumed utility inflation rate is 3%; the system cost is $3.50 per watt; the loan terms require 20% down and 4.9% interest; incentives are limited to the 30% Investment Tax Credit; and the project service life is 25 years. The financial results presented in Table 1 (below) show that applying a discount rate leads to a reduction in the present value of lifetime savings and the LCOE, as well as a slightly longer payback period. These results have implications for both the recommended financing option and the optimal system design.

comparison of common financial metrics for a solar system purchased with cash versus a 2-year loanTable 1. A comparison of common financial metrics for a cash purchase versus a 2-year loan-financed system (20% down, 4.9% interest), with and without discounting.

Customer financing: With a 2.5% discount rate, this client’s discounted lifetime savings are greater with a loan-financed system compared to a cash deal. The discount rate acts as a penalty for tying up the cash that the client might have invested in another asset. It is also interesting to observe the changes in LCOE. With a discount rate applied, the LCOE for a cash purchase increases by more than 30%, whereas the LCOE for the loan structure increases by only about 7%. We have already established that a dollar guaranteed today is not the same as one promised in 25 years, and it is equally true that a dollar owed 25 years from now is worth a lot less than one in hand today. Thus, a loan-financed system generally starts to look more favorable relative to a cash purchase as discount rates increase.

Design optimization: Designers can also use LCOE to determine whether a proposed solar installation generates a financially optimal amount of energy. If, on one hand, the effective utility rate is higher than the project’s LCOE, then the homeowner is leaving money on the table by not generating more solar energy. In this case, you should seek to design a higher-producing system to capitalize on the higher utility compensation rate. On the other hand, if the effective utility rate is lower than the LCOE, then the homeowner is losing money on each incremental unit of energy generated. In this scenario, the appropriate design response is to generate less energy, perhaps by specifying less-costly components with lower energy yields.

Analyzing results. While nobody wants to show lower financial returns, the discounted values in Table 1 more accurately reflect the financial returns of going solar. Furthermore, by performing this type of analysis, you can now credibly compare the returns on solar to other asset classes. Even with the 2.5% discount rate, the homeowner is saving more than $58,000 over the project’s life in today’s dollars and is earning an annualized return of 14.8%.

To put a 14.8% return for solar in PG&E service territory in context, State Street Global Advisers forecasts that the US bond and stock markets will have long-term annualized returns of 2.5% and 7.7%, respectively. However, financial markets are volatile, whereas solar provides savings as long as the sun shines (and assuming that regulators do not retroactively change policies). Furthermore, unlike income from the stock or bond markets, solar savings are tax-free. This means that if you provide an apples-to-apples comparison of financial returns, going solar is a no-brainer investment for this particular homeowner, as illustrated in Table 2.

Table_2_SP_9_5_QA_no_caption-1.jpgTable 2. Applying a discount rate allows for an apples-to-apples comparison of potential investment opportunities.

Accuracy and credibility. Applying a discount rate when assessing investment decisions is a well-established practice for financial and economic analyses. Many analogous industries have adopted this as standard practice. For example, realtor.com offers an online Rent vs. Buy Calculator where the discount rate—identified as the investment rate of return—is a required input. The U.S. government’s Office of Management and Budget uses discount rates when calculating the financial returns associated with investing in clean energy or energy efficiency projects, as well as for general budgeting purposes. Within the solar industry, the National Renewable Energy Laboratory (NREL) System Advisor Model (SAM) includes a discount rate when calculating financial metrics. In fact, NREL’s user guide for SAM states that the “discount rate acts as a measure of time value and is central to the calculation of present value.”

It is well established that the cost of acquiring customers is one of the major obstacles to making solar ubiquitous. Consumer education is one of the reasons commonly cited for the high cost: Consumers are often confused about the economic benefits of going solar. Perhaps one way to help alleviate this is to speak to homeowners in familiar terms. While most homeowners are unfamiliar with terms like azimuth or solar access, they likely have had to assess how much money to put into a 401k or whether to buy or rent. Moreover, they almost certainly understand that a dollar will not be worth the same in 25 years as a dollar is worth today.

Applying a discount rate as part of your financial analyses not only will improve your design and financial decision-making processes, but will also increase the accuracy and credibility of your results and allow you to make an apples-to-apples comparison between the returns of solar versus other asset classes. 

Topics: Financial Analysis, Solar Finance

Solar Alphabet Soup: 4 Acronyms That You Should Know

Posted by Samuel Adeyemo on Dec 11, 2016 12:00:00 AM

[This article was originally published in Solar Power World. ]

It isn't easy keeping up with the solar industry. Every few months new products, financing mechanisms, policies, and organizations pop up and change how you design and sell solar.

This article will bring you up to speed on some of the industry’s most frequently used acronyms, and keep you up to date on important emerging solar design and financing trends.

1. PACE - Property Assessed Clean Energy

PACE infographic

Infographic on how PACE works.

What it is: PACE is a mechanism by which homeowners can finance solar and energy efficiency projects via their property taxes. Local or state governments, working with traditional financiers, fund the upfront cost of the solar installation or energy improvement. Homeowners pay back their local authority via an increased property tax bill, usually over a period of 20 years.

Why you need to know about it: PACE has been around since 2001, but for the first 10 years of its life it had a limited impact on the industry. PACE programs received a big boost in August 2015, when the Obama administration issued a new directive to implement legislative changes making it easier to buy and sell properties that have solar installations financed by a PACE loan.

PACE offers low financing rates, tolerant credit requirements, but most importantly, local governments are incentivized to promote the product since they keep a portion of the PACE payment.

What’s in store: Over the next few years, I predict PACE-based financing will be the fastest growing financing option in the solar market.

2. LIDAR - Light Detection and Ranging

What it is: LIDAR is a method of obtaining information about objects or areas remotely by using light pulses emitted from a device to measure distances. The device combines GPS data with the distances it measures, constructing precise three-dimensional information about the shape of the environment.

Why you need to know about it: LIDAR is slashing solar design costs by helping the solar industry avoid truck rolls. With LIDAR, a solar salesperson or engineer can quickly generate 3D models directly from their office. They can precisely calculate building, tree, and obstruction heights as well as roof slopes. LIDAR data can be used to generate bankable shade reports, which are accepted for rebate purposes by rebate authorities and private lease financiers.

What’s in store: As the cost of acquiring LIDAR falls and its benefits become more accessible, I predict that LIDAR will continue to reduce the soft costs of residential solar. NREL estimates that remote site assessment has the potential to reduce industry soft costs by $0.17 per watt -- that’s the equivalent of half the cost of an average string inverter!

LIDAR in AuroraLIDAR data is used to improve the accuracy of remote site design in Aurora.

3. LCOE - Levelized Cost of Energy

What it is: The LCOE is the average cost per unit of energy that your solar project generates over its lifetime. Mathematically, it is the lifecycle cost of the solar project divided by the amount of energy it produces. The lifecycle cost of a solar project includes the initial cost to purchase it, financing costs (such as loan payments), and operations and maintenance costs (such as inverter replacement costs) over the life of the project.

LCOE equation

Why you need to know about it: LCOE is one of the oldest metrics in the solar industry. It offers an “apples-to-apples” way of comparing different financing options. If your client wants to compare the financial returns of going solar via a loan, lease, PACE, or cash purchase, LCOE is one of the best ways to determine their best option. Additionally, knowing your LCOE also has implications for solar design.

What’s in store: Over the next few years there are going to be more and more options for solar design and financing, so knowing how to calculate LCOE offers you the ability to evaluate them on an equal playing field and determine the best option for your customer.

4. LACE - Levelized Avoided Cost of Energy

What it is: The LACE is the average revenue per unit of energy that your solar installation generates over its lifetime. Mathematically, it is the lifecycle revenue (or avoided cost in the case of net metering or other similar compensation schemes) divided by the lifetime energy production. Lifecycle revenue includes revenue earned from feed-in tariffs, avoided cost from net metering schemes, and production-based incentives.

LACE equation

Why you need to know about it: One of the drawbacks of an LCOE calculation is that it does not explicitly take into account the revenue or avoided cost of a solar project. LACE, on the other hand, accounts for that. Since utility rates often vary by time of day, it is important to not only know how much energy you are offsetting, but at what times you are offsetting it. Without knowing the value of the energy you are saving, it makes it hard to compare two different solar designs that cost the same, but have different production profiles.

Furthermore, LACE allows you to easily compare a solar installation to an energy efficiency retrofit, for example. This has made LACE popular in government and utility planning circles. For example, a utility can compare the avoided cost of purchasing LED light bulbs versus installing solar (spoiler alert: it partially depends on the differential between daytime and nighttime electricity rates).

What’s in store: As the benefits of solar energy become increasingly explicit, customers will go from asking if they should go green to asking how they should go green. LACE provides a convenient way to compare the economic returns of different ways to reduce your carbon footprint.

GreenPantone's color of the year is "greenery" for a reason.

And there you have it! Hopefully this overview of some choice acronyms can help you stay on the forefront of this dynamic industry. If you think of some industry acronyms that are important for the solar community to know, tweet us at @AuroraSolarInc!

Topics: solar design, solar energy, Solar Sales, pv, Financial Analysis, PACE

LCOE Explained: Behind Solar Sales' Most Important Metric

Posted by Samuel Adeyemo on Nov 23, 2016 12:00:00 AM

[This article was originally published in Solar Power World.]

The Levelized Cost of Energy (LCOE) is one of the residential solar industry’s most commonly used metrics. However, it is also one of the industry’s most poorly understood and incorrectly calculated metrics. Some may have referred to it as the “solar rate” or the “solar cost of energy.”

Most conventional LCOE calculations incorrectly overestimate the cost, making solar seem less compelling than it should be.

Whether you design a sub-optimal project, or you under-sell what you are designing, you are leaving money on the table.

The Equation

At its most basic level, the Levelized Cost of Energy is the lifetime cost of a solar installation, divided by the amount of energy the installation generates.

LCOE basic equation

By taking into account the upfront cash payment, as well as lifetime O&M and financing costs, the LCOE is supposed to give an “apples to apples” comparison of going solar versus staying 100% on the grid [1].

To explain this better, let’s expand the numerator of the LCOE equation:

Lifecycle cost of solar project = PC - ITC + O&M + LP - PVPBI

where:
PC = Project cost
ITC = Investment tax credit
O&M = Operations & maintenance costs
LP = Loan payments
PVPBI = Present value of performance-based incentive

So far most of this should be fairly intuitive. The more expensive the project (PC) and the higher your costs to maintain (O&M) and finance (LP) it, the higher your LCOE. Your investment tax credit (ITC) reduces your project cost, so that reduces your LCOE.

Watch Out for Performance-Based Incentives

Pay attention to the term “Present Value of Performance-Based Incentives.” Miscalculating this metric could cause money to leak out of your, and your client’s, pocket. It could contribute to increased carbon emissions by causing you to undersize your solar project, and by reducing your chances of convincing your customer to go solar.

Performance-based incentives (PBIs) are payments that are tied to your solar project’s energy production. In the U.S., the most common form of these is Solar Renewable Energy Credits (SRECs). At the time of writing, ten states  have active SREC programs or markets. SRECs are tradable commodities that represent the energy generated from solar, which can be used to meet renewable portfolio standards (RPS).

Energy Sage SREC diagramAn example of how solar renewable energy credits work from Energy Sage.

Carbon credits are another type of PBI. Most home and business owners monetize their PBIs by selling them [2]. The actual value the homeowner receives will reflect the present value of the expected PBIs.

How Much Do Performance-Based Incentives Really Matter?

The effects this will have on your project’s LCOE vary based on the SREC program. Let us examine a homeowner that consumes 10,900 kWh per year. I designed a 9.9-kW system in a state where SRECs are currently priced at $0.27/kWh. Let us assume that this 9.9-kW installation has a Total Solar Resource Factor of 71% [3] .

Aurora’s performance simulation engine estimates that this design produces 10,400 kWh per year, and it will produce 320.5 MWh over the project life [4].

Let us assume further that the homeowner purchased the system (so we don’t have to worry about loan payments) at a price of $44,460 ($4.5/W). Let us also assume an inverter replacement cost of $0.4/W. The inverter is replaced once over the life of the system.

LCOE calculation gif

Here is a summary of the assumptions:

Project Cost = $44,460
ITC = $13,338
O&M = $3,960
LP = $0
PVPBI = $21,265

With those assumptions, the project’s LCOE excluding PVPBI is $0.11/kWh, while the LCOE including PVPBI is $0.09/kWh - almost a 20% difference! That makes a big difference in how attractive solar will appear to the homeowner.

Let us examine what effect this difference in LCOE has on the optimal system size. An optimal system size is realized when the project’s LCOE is equal to the prevailing utility rate.

The example utility in this case, National Grid, has a tiered residential rate that increases with your net energy consumption. By having a lower LCOE, you can have a bigger system since you can afford to offset both the highest and lowest electricity tiers.

  Rate ($/kWh)  
Max kWh/month Period 1 Period 2
600 0.09355 0.10291
Infinite 0.10017 0.10953

For the example above, a 9.9-kW system offsets almost 100% of the homeowner’s energy consumption. This is not a coincidence; when your LCOE is less than your marginal utility rate, you want to offset as much of the homeowner’s energy consumption as you can. In this case, at a LCOE of $0.11, this project would not be economically feasible (hence the incentive program).

Despite its simplifying assumptions, this example illustrates how understanding all the aspects of a complete LCOE calculation will aid you in sizing solar installations. It also shows the importance of including the present value of performance-based incentives in your LCOE calculation.

For those of you who are interested: here’s the unabridged LCOE formula Aurora uses:

LCOE unabridged

Notes:
[1] This article assumes a Net Energy Metering regime.

[2] Often, the solar installer or financier will do this for the homeowner.

[3] Total Solar Resource Factor is the ratio of how much irradiance hits the roof surface, as compared to how much irradiance the roof surface would receive in optimal conditions (perfect orientation and no shading).

[4] This assumes a degradation rate of 0.5%.

Topics: Solar Sales, Financial Analysis

Solar Landmarks: A Solar Design for Buckingham Palace

Posted by Samuel Adeyemo on Oct 24, 2016 12:00:00 AM

In our Solar Landmarks series, we explore the world, all from the comfort of the Aurora office in Palo Alto. We will “travel” to famous landmarks and investigate their potential for solar energy generation.

For each site, we will go through the entire solar design process—from determining an optimal component layout based on the roof structure and shading losses all the way to a cost analysis with various financial options.

Buckingham Palace

3D model of Buckingham Palace in AuroraA 3D model of Buckingham Palace, created in Aurora.

The UK has recently made some decisions that have left its solar industry struggling to grow. Firstly, it surprised the solar market by cutting the solar feed-in-tariff by 65%, then it surprised the financial markets by voting to leave the EU. This leaves us wondering: what can we do to help highlight the environmental and economic benefits of solar in the land of the Union Jack?

What better way to make a statement than by helping Her Majesty The Queen go solar? We will perform a preliminary site assessment for Buckingham Palace, which was recently listed as the world’s most expensive home with a value of over $1.25 billion (we used an exchange rate of 1.25 US dollars to 1 Pound Sterling throughout this analysis).

Balancing a Budget: Some Background on Royal Finances

Before we get out over our skis, our first step is to qualify the lead. While we suspect they are good for it, we need to make sure that the Royal Family has enough cash, or adequate credit, to afford a solar installation. We also want to get a sense of how much they are spending on electricity in order to ballpark how big a system they would need.

At the time of writing the Royal Family has not returned our request for a credit check, however we are able to retrieve information on their income from The Sovereign Grant Annual Report. For those in the US, this is essentially their equivalent of a W2, except it is measured in millions of pounds and read to members of parliament. And it is prepared by the delightfully named Keeper of the Privy Purse, as opposed to Turbo Tax.

Here are some fun facts that we learn by combing through the Annual Report:

  • The Queen is technically the Head of the Armed Forces, the Judiciary, the Civil Service and is the Supreme Governor of the Church of England (you thought you were wearing multiple hats).
  • The Queen has met eleven of the last twelve US Presidents (we guess even The Queen needs a good excuse to use the good silverware).
  • The Queen has sent 232,000 congratulatory telegrams to centenarians on their 100th birthdays (yes, telegrams—we had to Google them too).
  • The Queen pays 50% of her suppliers within 15 days of receipt of invoice, and 95% of them within 30 days of receipt of invoice (an installer’s dream!)
  • The Royal Household had income of approximately $65 million in 2015.

We think they’re good for it.

The Report records that Buckingham Palace consumed 4.3 million kWh of electricity from the utility grid (that’s about 4 times the estimate we used for the White House, which is a bit more secretive). Based on the utility rates available for the Palace’s area code, we calculated an average day-time rate of approximately $0.15/kWh for daytime energy usage, and $0.07/kWh for nighttime use. Great, we are ready to get started designing!

Prospecting the Roof Structure

Buckingham Palace’s floor area covers more than 19 acres! The site itself dates back to the seventeenth century, although the modern building was built between 1820 and 1828. We started by taking a look at the irradiance and shading characteristics of the roof.

Irradiance map of Buckingham PalaceThe irradiance map, generated in Aurora, reveals that south facing surfaces have the most sunlight, and that most shading comes from adjacent buildings. 

With a glance at the irradiance map, we quickly see why 4 million British tourists make the annual pilgrimage to the relatively sunny United States: An average irradiance of about 1000 kWh/year is even less than Maine’s, which weighs in at about 1,200 kWh/year.

Unsurprisingly, as seen by the lighter colors on the irradiance map, we found that south facing roof surfaces were the best locations for a solar installation. Unfortunately, the same blocky neoclassical architecture that draws legions of tourists every year also results in roof surfaces that have few uninterrupted areas for placing modules.

Carport or Ground Mount?

With few options for a roof installation, we have to look to the ground game. Fortunately, in addition to having over 19 acres of floor space, Buckingham Palace has over 40 acres of garden. We are going to look at installing a carport or ground mount system in the backyard. (After all, how much lawn does one really need for croquet?) An elevated structure will still allow for plenty of space for picnic tables for afternoon tea. We can use pipe racks in a 404 kW system and TrinaPeak 330W modules with cell-string level power optimizers, allowing us to mitigate the effects of shading from nearby trees.

Given the size of the project, and due to the marquee nature of our client, we’re assuming an aggressive $2.1/W-DC installed cost.

Spec Table

Pitch 25°
Rack Height 15 ft
Modules 1,224
Estimated Project Cost $848,232
System Size 404-kW

3D rendering of ground mount

Simulating Energy Performance

Taking into account system loss factors such as soiling, snow, and shading, and running a sub-module performance simulation, we estimate that this solar system can produce 330,195 kWh of electricity in its first year of operation.

Loss tree in Aurora

Energy production and loss diagram

Our loss tree diagram shows exactly where we are losing energy and how we might improve our design—for example we see inverter clipping losses of 0.8%.

Financing options

Now that we have established that we can provide shelter for the visitors to Buckingham Palace, and offset approximately 10% of the Palace’s energy consumption, let’s see the financial return of this project.

The UK has a feed-in tariff system where the system owner is paid a credit for any energy she produces, whether it is for self consumption or for export to the grid. At the time of writing, for a 404 kW system, the rate is approximately $0.02/kWh. Adding this to the baseline energy cost of $0.15/kWh, we have a total combined feed-in tariff rate of $0.17/kWh (to simplify the problem we are ignoring the time of use and export bonus rates).

In our first attempt we assume that the Royal family dips into their savings to pay for this solar installation with cash.

Cash Financed

Cash financed returns graph

Hmm, a return of 6.55% and a Payback Period of over 14 years is not anything to write home about. The Queen probably has a pretty good FICO score though, and at a very minimum, she could post her house for collateral.

Loan Financed

After the Brexit vote bond rates are close to historic lows, so it should be a good time to lever up. Let's model a loan for 80% of the system cost at a rate of 2.2%.

Loan financed returns graph

Debt does the trick! We are now looking at a very respectable sub 7 year payback, with a return of investment of almost 16%. That's enough to earn a famous Royal Wave:
Queen waving gif

Notes

According to UKPower.co.uk, electricity rates in Buckingham Palace postal code are 11.76p (incl. VAT) per kWh during the day, and 5.63p (incl. VAT) at night, with a standing charge of 16.6p a day.

We make the following financial and system design assumptions:

  • Annual Degradation Rate: 0.25%
  • FIT Inflation Rate: 3%
  • Inverter Life: 13 years
  • Inverter Replacement Cost: $.3/W
  • Project Life: 25 years

The Inflation Rate was calculated by averaging the annual utility bill increase from 1997 - 2015. The utility bill information was obtained from the UK Department of Energy and Climate Change: https://www.gov.uk/government/statistical-data-sets/annual-domestic-energy-price-statistics

Topics: Solar Landmarks

How LIDAR is Transforming Remote Solar System Design

Posted by Samuel Adeyemo on Sep 22, 2016 12:00:00 AM

What do self-driving cars, the Mars rover and remote solar site assessment have in common?

All three technologies use Light Detection and Ranging (LIDAR) data to quickly and accurately assess the environment in which they perform their operations. Since the 1960s when LIDAR was first used by NASA scientists for research purposes, it has quickly captured the imagination of professionals that want to remotely make precise measurements or three-dimensional models of an area.

Over the last 15 years, technological improvements and cost reductions have greatly increased the accessibility of LIDAR data, which is having a beneficial effect on the solar industry.

How LIDAR data is gathered

LIDAR scanners emit pulses of light energy (using a laser) at buildings and other objects in an area, and measure how long it takes for the pulse to return. The laser pulse travels at the speed of light. Accordingly, the distance it travels can be calculated by multiplying the amount of time it takes for the pulse to arrive back at the scanner, with the speed of light, and dividing that figure by two (since the pulse makes a round trip).

In the case of solar, the LIDAR scanner is typically fitted on a plane, which also contains a global positioning system (GPS) and an inertial measurement unit (IMU). The GPS unit measures the elevation, and the location (latitude and longitude) of the plane. The IMU measures the tilt and other data about the plane and scanner position in order to adjust the distance calculations.

LIDAR airplane Illustration of LIDAR capture. Source: LIDAR-America.com.

How LIDAR data is used

Combining location and distance LIDAR data recorded by the scanner, software packages can generate a 3D model of the location. In the case of a self-driving car or the Mars rover , the vehicle uses this 3D LIDAR model to autonomously navigate without colliding with any obstacles.

In the context of solar, 3D LIDAR models can be used to calculate building heights, roof slopes, and tree heights. LIDAR data is also used to calculate how much irradiance (sunlight) and shading is cast on a rooftop by objects such as trees, chimneys and buildings. By combining the resulting 3D LIDAR model with local weather data, software applications can calculate irradiance and shade metrics, such as solar access and total solar resource factor (TSRF) values.

LIDAR in AuroraLIDAR can be used to generate a 3D model of a house.

How accurate is LIDAR modeling?

Aurora LIDAR shading values have been proven by the National Renewable Energy Lab (NREL) to be statistically equivalent to onsite measurements. An NREL study funded by the US Department of Energy (DOE) found that remote shading engines that implemented LIDAR were within 3.5% of on-site measurements.

On the basis of the NREL study, and their own independent assessments, several financing entities and rebate authorities such as the New York State Energy Research and Development Agency (the United States’ largest rebate authority) now accept Aurora's Shading Reports in lieu of on-site measurements.

The bottom line: LIDAR makes solar quicker and cheaper

According to the DOE, the customer acquisition cost for a typical 5kW residential system is $1,100. This is largely due to costs associated with site visits, wasting time and money by marketing to homes that are not a good fit for solar, and educating the homeowner about the economic benefits of them going solar.

LIDAR modeling helps address many of these problems. Sites can quickly be identified and screened for their solar potential. Accurate system design and bankable shade reports can be generated remotely. The homeowner can easily see how much irradiance their roof receives, making it easy for installers to explain their solar design decisions. Most importantly, LIDAR modeling can be performed quickly: a remote shade report takes less than 15 minutes to generate. See how to use it in Aurora. 

Integrating LIDAR into the solar design process offers the prospect of faster and cheaper solar, without a meaningful loss in accuracy. NREL estimates that remote site assessment has the potential to reduce industry soft costs by $0.17/W. To put that in context, remote site assessment could save you the equivalent of half the cost of an average string inverter.

The land area covered by LIDAR is constantly increasing, and as the technology finds more commercial applications, the cost of acquiring LIDAR is falling. This is good news for the solar industry. LIDAR based remote site assessment provides an accessible mechanism to dramatically lower the soft costs of the industry.

Topics: imagery, Technologies Transforming PV Design

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