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Solar Finance 101 · The Energy Academy

Do the project economics work?

Test a commercial rooftop solar project, follow the cash from revenue to sponsor return, and see exactly which assumptions move the numbers.

Free tool No sign-up required About 5 minutes
1 · Set assumptions2 · Run the model3 · Compare scenarios

New to project finance? Start here.

Everything below is already filled in with a realistic 1 MW rooftop project, so you never face a blank spreadsheet. You do not need to understand every field to get value from this.

  1. Change one thing at a time. The three that move returns most are system size, energy price and installed cost.
  2. Tap any i bubble for a plain-English explanation of what a field is and why it matters.
  3. Press Run the model. After that, every edit updates the results live.
Or try a preset
What this model does and does not include. It assumes a solar-only project funded with term debt and sponsor equity, annual periods, and immediate use of modeled tax benefits. Tax equity is explained for context but is not included in the cash-flow allocation. Construction financing and monthly funding draws are not modeled.

1. Project and production

Define the asset and estimate how much electricity it will produce.

Locked for this introductory model
Locked for this introductory model
kWdc
Typical commercial range: 250–5,000 kWdc
kWh/kW
Broad U.S. range: 1,000–1,700 kWh/kW
Estimate production with NREL's free PVWatts® Calculator ↗
%
Common assumption: 0.35%–0.70%
years
Common contract term: 20–25 years

2. Revenue

Choose how the project earns money or creates customer savings.

$/kWh
Illustrative only: $0.08–$0.25/kWh
%
Contracted PPAs often use 0%–3%
$/MWh
Market-specific; default is $0
%
Contracted PPA often modeled near 100%

3. Costs

Estimate what it costs to build and operate the project.

$/Wdc
Illustrative commercial range: $1.50–$3.50/W
$/kW-yr
Broad commercial range: $15–$45/kW-year
%
Common assumption: 2%–3%
$/kW
Illustrative replacement: $75–$150/kW
year
Often modeled around Year 12–16. Try moving it inside the debt term.
Advanced: contract and asset life Optional
years
Common modeled asset life: 25–35 years
$/kWh
Use a conservative market-specific assumption
%
Illustrative range: 0%–3%
Advanced: financing assumptions Optional
%
Illustrative advance-rate range: 40%–70%
x
Illustrative target: 1.20x–1.35x
%
Use a current project-specific quote
years
Usually shorter than the PPA term
%
Illustrative range: 1%–3%
Advanced: tax and valuation assumptions Optional
%
Educational default only; verify eligibility
%
Project-specific; do not assume all costs qualify
%
Sponsor-specific assumption
%
Set based on placed-in-service year
%
Illustrative target: 6%–12%

Your model results

Follow the project from operating cash flow through debt service and taxes to the sponsor's return.

PPA
Results now update live as you change any assumption

Reference ranges are educational. Real investor and lender requirements vary by market, contract, financing structure, project stage and risk. Use these bands to build intuition, not to underwrite a deal.

What drives this result?

Compare two decisions side by side

Save the current assumptions as Scenario A, change one input, then save Scenario B. Seeing the same project two ways is the fastest way to learn what actually moves returns.

Annual project cash flow

Unlevered after-tax cash flow Sponsor equity cash flow Debt service

What to look for: the gap between the navy and blue lines is what the lender takes. When debt is repaid, the blue line jumps up to meet the navy one.

Annual cash flow detail

Nominal dollars. Start with the DSCR column — the highlighted row is the tightest year, and it is the year a lender will focus on. Scroll for all operating years.

YearEnergy (MWh)RevenueOpexEBITDADebt serviceTaxes / (benefit)Project CFEquity CFDSCR

Where does tax equity fit?

This version assumes term debt plus sponsor equity. In many real projects a tax-equity investor or a tax-credit buyer helps monetize the credit and depreciation when the sponsor cannot use them efficiently. Those structures change the timing and allocation of both cash and tax benefits, so they need a more detailed partnership or transferability model than this one.

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Educational tool only. This simplified model is not investment, tax, legal or accounting advice. Validate assumptions and formulas with qualified professionals before making project decisions.