The Next Generation of Photovoltaic Project Evaluation

The Next Generation of Photovoltaic Project Evaluation

Investing in and operating commercial PV systems is, as is usual with tangible assets, capital-intensive, and expectations of an attractive long-term return profile are correspondingly high.

This is accompanied by the financial risk of (mis)decisions that are often made at the very beginning of the investment process.

Evaluating and planning a PV investment, determining the value of an existing PV system and analysing the cost structure of a current or potential investment in order to identify key value drivers: this is the general standard for a valuation solution against which we want to be measured.

Based on our years of market experience, several hundreds of transactions on our platform and knowledge of the requirements of investors, financing banks and insurance companies alike, we have further developed our internal valuation tools.

The PV Returns Planner from Milk the Sun is a solution that can be seen as one of the best on the market in terms of price-performance ratio and is hard to beat in terms of simplicity.

What we want to achieve with our standardised solution for the evaluation of commercial PV projects

We collected feedback on the need from the market, both on the operator and investor side. This paved the way to build an easy-to-use profitability calculation for the professional planning and evaluation of commercial PV projects. This tool can be used for purchase or sale, as well as for the optimisation of a planned turnkey or an existing plant already in operation.

The solutions available on the market to date are either very costly or time-consuming, or so individually developed and tailored that they are rarely widely applicable.

In particular, those who want to make long-term decisions and are guided by proven investment principles from other industries value the following principles as essential:

1. Relevance

Commercial PV systems are technical production units with corresponding complexity and multiple components, which are subject to many imponderables with a correspondingly long-term horizon.

Therefore, as is often the case when making decisions under uncertainty, the focus should be on the essential and assessable factors that significantly influence the return on investment, without getting lost in the details.

2. Standardisation

Each project naturally has its own peculiarities – its specific stage, a specific location, or the individual characteristics of the respective investor/operator.

Nevertheless, for professional and comprehensible decisions, especially for communication with partners and/or external parties, the principle of comparability applies – both to assumptions made and to valuation principles and calculation models. As is already customary in the investment processes of most professional investors.

This is less about absolute correctness than about comparability – especially to be able to learn from past decisions.

3. Simplicity in combination with cost-benefit ratio

In the commercial market in particular, it is not about imitating the complexity of decision models from the industrial segment with large-scale plants.

It is rather a matter of ensuring a simplification both in the handling of the creation and the presentation of the results and applied methodology, without losing the essential information.

Thus, an online and independent valuation tool offers an ideal alternative to cost- and time-intensive appraisals on site or by corresponding experts.

When the PV Returns Planner is beneficial

Do you know this situation? Three market participants with whom you exchange information – three different methods of determining key figures and presenting the profitability of your investment.

This illustrates that it is not only important to use a reliable and standardised solution solely for your own usage, but also when a ground for decision-making is needed for communication and for convincing third parties.

According to our experience, the PV returns planner is needed above all:

  • if you want to invest in a PV project and, based on the purchase price and the available yield and cost factors, you want to determine the individual return on investment,
  • if you want to finance a potential investment object or already existing investment and want to make a corresponding calculation and simulate financing offers,
  • if you are planning to sell your PV system and would like to determine a fair value based on the history of the system in accordance with standard market yields, so as to start negotiations with potential buyers confidently,
  • if you want to compare the current yield of your current PV system with previous yield and return forecasts and question assumptions made,
  • if you want to simulate the immediate effects of planned optimisation measures on income, cost or financing positions on the cash flow and future return of your PV investment.

Especially when communicating with third parties, it is helpful to be able to identify the key assumptions and simulate them easily without having to constantly revise or discuss the valuation approach.

This not only saves time, but also money. After all, once you have done solid preliminary work and can narrow down certain options or exclude originally assumed factors, it makes sense to involve experts for detailed topics and to spend time and effort on site.

woman works with the ROI planner to optimize her photovoltaic investment

What you can expect from the PV Returns Planner

We have used our own experience and input from our customers as well as our partner network to make our PV project evaluation targeted, meaningful, flexible – and, best of all, online.

All relevant valuation factors for the corresponding PV project are presented clearly, both graphically and in tabular form, based on an equity analysis.

The current valuation as of the reporting date is carried out at a yield expected to be in line with the market, so that the relevance is guaranteed compared to the current market.

The standardized yield evaluation includes an industry standard cash flow calculation (excl. taxes and depreciation) together with a simulation of significant sensitivities of the investment – and for major cost drivers, current benchmarks are listed for potential optimization opportunities.

Following components are particularly noteworthy:

  • Up to three different types of remuneration can be entered. In addition to the classic feed-in tariff, direct marketing or PPAs and self-consumption can be processed.
  • Up to 2 debt financing components can be shown simultaneously – in addition to the annuity loan, also as an instalment loan.
  • The consideration of redemption-free periods is also possible.
  • In addition to the annual lease payment, the one-off lease is also taken into account.
  • In addition to the classical return on assets and return on equity, a fair value consideration is obtained as well as a presentation of the amortisation period for the equity capital employed.

And this is how you get your PV project evaluation.

Please note that any results can only be as good as the quality of the data you provide as part of the evaluation.

You can access the PV Returns Planner page via the following button:

Order my Returns Planner

Please use our online form to enter your data.

Where it is possible, we make basic assumptions, to make the data entry easier for you. These are explained in our help section or the frequently asked questions.

After we have received your order, we will check your data for plausibility and contact you if we have any question.

Subsequently, we create your individual PV project evaluation within 2 working days.

After an internal review, you will receive the individual evaluation of your project as a PDF file including an Excel data sheet as well as an invoice for your order by e-mail.

To have an idea of what you will get, take a look at our sample report as a PDF here.

This is a free translation. To read the original article in German: click here.