Production degradation accounts for the decrease in solar energy system output over time due to factors such as solar cell degradation, increased connections and wire resistance, mechanical deformation due to weather cycling, and electrical component failure. The amount of degradation depends on the PV technology, local climate, and other application-dependent properties.
How production degradation works in Sighten
Sighten accounts for production degradation on an annual basis by applying a percentage degradation, or rate, for each year of the solar energy system's lifetime, beginning in Year 2. No production degradation factor is applied to year 1 production estimates in Sighten.
Production degradation rates are configured by financial product, meaning that the same degradation rates applies to all solar energy systems within a financial product. The default degradation rate is set to 0.7% per year and functions as follows:
Example:
Year 1 Estimated Production = 10,000 kWh
Year 2 Estimated Production = Year 1 Estimated Production x (100% - 0.7%/Year) = 10,000 x (100% - 0.7%) = 9,993 kWh
Year 3 Estimated Production = Year 2 Estimated Production x (100% - 0.7%/Year) = 9,993 x (100% - 0.7%) = 9,986 kWh
and so on...
In this example, the cumulative production degradation over a 20-year lifetime would be 19 x 0.7% = 13.3% meaning that in Year 20, the production would be degraded by this amount on a year-to-year basis.
Production degradation impacts
Solar energy system annual production degradation affects quotes, proposals, and contracts in the following ways in Sighten:
- Reduces the annual estimated energy production in future years, as displayed in Sighten proposals
- Financial impacts in solver and quoting process - lower production in future years due to degradation will affect financial model accordingly, including:
- Payments over time (e.g., future year's estimates)
- Post-solar utility bill
- Future year's cash flows
- Solar savings, return on investment, and payback calculations
Contractor degradation configurability
Production degradation rates are configured by financial product and may vary from one to the next, depending on the financier's designation. For example, the default degradation rate for cash purchase quotes is set to 0.7% per year but a financier may have set it to a different value for their solar financing product.
To configure the production degradation rate for cash purchase quotes at your company, please contact Sighten support at support@sighten.io and submit a request. To configure the production degradation rate for other solar financing products, please contact the financier's representative and submit a request.
Financier degradation configurability
Since production degradation rates are configured by financial product, a financier can designate a fixed degradation rate for the lifetime of their financial product. The default value is set to 0.7% per year but can be revised to a different value. Please contact your Sighten Account Manager and/or submit a request to Sighten support to revise this value.
Note that production degradation rates are static for all years of the financial product's lifetime. That is, Year 2 degradation rate is the same as all subsequent years.
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