What's Solar Really Worth?
As the competition for commercial and utility scale photovoltaic (PV) projects increases, a better method for comparing proposal prices is needed to accurately value each offer. Currently, a common practice is to evaluate projects on a dollar-per-watt ($/W) basis, either DC or AC. This assumption is only valid as long as all the proposals have their DC or AC system sizes the same. However, due to the complexity of PV performance modeling and the lack of industry standards, companies size their systems differently based on the modeling and the needs of the customer. As a result, using $/W DC or total dollar value doesn’t always provide an accurate comparison of value.
Using dollars-per-watt or bid total doesn’t always provide an accurate comparison of value.
For any residential, commercial, or utility project, there can be anywhere from a few bidders to hundreds of bidders. After evaluating a potential bidder based on quality, the four main parameters in which proposal prices will vary are Watts DC, Watts AC, kilowatt hours (kWh), and total offer price. Frequently, customers will only specify a required price for one or sometimes two values. It’s only natural to attempt to create a common metric for comparing all of the bidders. Typically, this is done either by dividing the offer price by power of the system (DC or AC) and generating a $/W DC or $/W AC price. However, condensing the complexity and intricacies of a power plant to one metric doesn’t allow a customer to accurately compare projects. The customer should understand that and relate to potential bidders how they will value the project, and price it accordingly. Additionally, as many parameters as possible should remain unchangeable.
When purchasing and evaluating PV modules, it’s appropriate to use $/W DC. This is because a module’s value is found in the wattage that it can produce. With the same technical specifications, the customer would be justified in selecting a module priced at $1.50/W DC versus one priced at $1.60/W DC. For a 1 MW DC project, this would relate to a cost savings of approximately $100,000. However, using the $/W DC comparison is no longer adequate when evaluating a proposal for the entire power plant system, because the intrinsic value for the system varies from component to component and customer to customer.
There’s efficiency in scale; the incremental cost to do additional work decreases as the magnitude of work increases.
The costs for racking equipment illustrate the shortcomings of the $/W DC comparison. For a particular project, assume that each rack needs to hold 20 modules and the customer requests that each supplier provide quotes on a $/W DC to save time. The following bids are received:
All three companies are equal in terms of quality and reliability. Naturally, one would select Company 1. However, upon further investigation each company’s assumptions are revealed:
With this information,