Commerical Solar Project Sizing and Financial Model

For this personal project, I analyzed a prospective commercial solar installation on a warehouse roof in Maryland, and created a detailed financial model for the project.

Project Sizing:
Using publicly available data for the building’s area and average energy consumption for warehouses and distribution centers per square foot, I estimated the building’s annual energy consumption to size the installation and PPA contract. From there, I used Solidworks to sketch out International Fire Code standards for rooftop solar installations to assess the suitability of the rooftop. These calculations found that the building needed roughly 1.2GWh of energy supplied annually.

Via NREL’s PVWatts calculator, I found that this corresponded to approximately a 900kWp installation with ballasted panels at 30 degrees. However, the roof area of the warehouse would support up to 1,500kWp, allowing the project to sell a significant portion of the total generation at the going merchant rate. Using NREL’s study on solar project costs relative to installed capacity (https://www.nrel.gov/docs/fy22osti/83586.pdf), this installation size should cost roughly $2.5 million, leveraging a full-wrap EPC.

Financial Model:
As the basis for this financial model, I used a model I built as part of a Udemy course on solar projects. I have modified this model to account for production tax credits (PTCs). The model sizes the optimal debt level via macros, builds a Major Maintenance Reserve Account (MMRA), a Debt Service Reserve Account (DSRA) with a minimum coverage ratio of 1.3x, and a Decommissioning Reserve Account.

As inputs to the model, I assumed the following:
• Installed Capacity: 1.5MWp
• P90 Net Generation: 2,115 MWh/MWp
• PPA Output: 1.21MWh
• PPA Term: 20 years (though 10 years is also included in the model)
• PPA Price: $55/MWh
• Inflation: PPA grows with inflation rate of 2% annually
• Merchant Market Price: $50/MWh, and decreasing in the future
• Asset Lifetime: 30 years
• Generation profile: from PVWatts
• Availability: 98-99%
• Degradation: 0.25% per year (1% the first year)
• EPC: $2.22m
• Developer Overhead: $300k
• Straight Line depreciation
• Corporate tax rate: 29%
• Loan interest: 5.0%
• PTC Credit: $27.50/MWh
• Renewable Generation Credit (REC): $8/MWh at current market rate

Given these inputs, the model finds an optimal Debt:Shareholder Loan:Equity ratio of 80:17:3, which results in a levered project IRR of 12.66%, with a total revenue of $6.87m. More output details can be found in the dashboard screenshot.