Looking Forward – Calculating Future Utility Costs

Genability has added forecasted seasonal rates to our Solar Savings calculations.  Not to be confused with utility rate inflation (we’ve got some upgrades coming in this area soon), forecasted seasonal rates allow you to use the most recent version of the tariff and maintain the seasonality embedded in frequently changing rates like Fuel Cost Adjustments.

To see how this affects savings calculations, let’s look at first year utility bills using three different methodologies for a typical residential solar customer in Boston:

TTM – Trailing 12 Months

FTM – Forward 12 Month, no forecasts

Switch FTM w/ forecasted rates

July 2013

$2,368

$2,521

$2,513

November 2013

$2,430

$2,507

$2,543

February 2014

$2,419

$2,758

$2,557

The TTM approach comes with the lowest costs of the three approaches, hardly a surprise considering it uses older versions of the rates.  The FTM approach better reflects what the customer will pay, unless you run you quote when there is a spike in prices (fuel costs were especially high this February).

The Switch method uses forecasts of frequently changing rates, so your forecasted utility costs mirror the rise and fall of prices throughout the year.  Thus, the Switch method incorporates the most recent information, but does not see every price spike as a trend.

This new method is the product of several months of analysis in which we reviewed over 100,000 rate changes over the past three years, and thousands more from historical EIA data.  Our research gives us confidence in using our rate forecasts to predict savings not just for the first year, but for the entire lifetime of the solar system.

When you present your customer savings for a 20-year lease or PPA, what you use to calculate the first year’s utility bill really matters.  A small difference in the 1st year assumptions can grow into a big discrepancy over the lifetime of the system.  By using forecasted rates, the Switch methodology is a clear upgrade on previous methods of calculating first year and lifetime savings.

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