What is Methodology for the Solar Equity Calculator?

What's the Methodology behind it? 

We use the discounted cash flow method that calculates the dollar value of the energy a photovoltaic system will generate from today through the end of the power production warranty period.

We look at the total future cash flow benefits that the homeowner will receive from the PV system over its useful life, and calculate what the value of those future benefits is at the moment in time when the calculation is performed.

This value is an important data point for the appraiser that can facilitate their use of the income based approach.

How valid is the methodology used to calculate results? 

The methodology supports the income based approach, which is one of the three methodologies approved by Fannie Mae and Freddie Mac for valuing a PV system.

Pearl’s calculator is currently being used by Elevate in their course for appraisers on how to value a PV system. Pearl's tool pulls data from credible third-parties to:

generate the energy production of solar system 
calculate the discount rate 
determine the utility rate

How “permanent” are the results? 

The Equity Tool calculates the discounted cash flow based on a variety of factors that change over time. Utility rate, discount rates, and other market dynamics can and will change the relative value of a solar system.

If utility rates increase more than what is expected, a system's discounted cash flow (and associated value) will increase. Alternatively, if energy prices go down over time (or increase less than was assumed when the calculator was run), a system's discounted cash flow will decrease.

Pearl recommends that appraisers re-generate the results when they perform their services. For example, if a contractor issues a Pearl Report on an installation in 2021 and an appraiser is performing a refinance in the year 2023, the appraiser could use the results that were generated in 2021, but would preferably re-generate the results to increase the accuracy based on the current, year 2023, utility rates, discount rates, and other market dynamics.

Note: The equity calculation can only be issued for an owned or financed system. Leased and PPA systems are not eligible.