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Solar Equity Calculator FAQ

Below is an overview of the Pearl Solar Equity Calculator along with a few of the most Frequently asked questions that we get from our Partners and Homeowners.

Best practices for using Pearl's Solar Equity Calculator:

  1. Get started by navigating to: Pearl's Solar Equity Calculator Login Page
  2. Ownership type - Choose owned outright or owned with financing.
    1. Note that a Pearl report can be issued for systems that are lease or PPA, but a discounted cash flow calculation is not available until the time of transaction (sale or refi) when the homeowner can generate a fresh calculation based upon the ownership/transfer details.
  3. Utility Information - We recommend using the Average Utility Rate for these calculations.
    1. You can select “specific utility plan”, however, the system will ask you to provide 12 months of detailed utility invoice information.
  4. Install Date - Always use the current month as the installed month, this is meant to be a snapshot in time from today’s date.

Jump to Your Question:


What is our Solar Equity Calculator? 

It is a tool to show homeowners how much value a solar installation can add to their home, over time, when it comes time to refinance or to sell their home. 

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. 

Financed systems in the calculator 

Pearl’s calculator will generate an equity value for both fully owned systems and financed systems. For systems which are financed and have a UCC-1 filing homeowners need to understand how to handle a UCC-1 filing when they plan to sell or refinance.

Prior to refinancing or selling a home with a solar system secured by a UCC-1 filing, a homeowner should contact their lender and request that they suspend the filing. This step is important, as failure to do this may result in the appraiser considering the solar system as “personal property,” rather than a feature of the home, and assigning no value to it in the appraisal as a result. 

Additional information will also be provided to the homeowner when they receive their report. In our Appendix C we walk the homeowner through the steps to take when refinancing or selling a home with a UCC-1 filing. 

More Info On Key Data Inputs 

Energy Production 

How does the calculator generate the energy production of the solar system? 

Pearl uses an API to connect with software managed by the National Renewable Energy Laboratory (NREL). NREL is a U.S. Dept. of Energy laboratory. 

A minimum set of data is needed to generate the energy production results: 

Ownership Type 
System size (kW) 
Utility name / rate 
Installation date of panels 
Inverter type 

Pearl uses industry-accepted assumptions based on NREL guidance, such as azimuth and tilt. 

NOTE: A contractor can enter more data about the solar system above-and-beyond the minimum set of data. That data will override the industry-accepted assumptions and will create more accurate results. 

Discount Rate 

How does the calculator determine the discount rate? 

Pearl references Fannie Mac's 30-year mortgage rate as a proxy for the discount rate. Pearl updates the rate weekly. Because these rates vary over time, Pearl's Equity Calculator results will change over time. 

Contractors can not change the discount rate. However, qualified appraisers that use Pearl's Equity Calculator do have the ability to select a different discount rate based on their professional opinion and expertise. 

Utility Rate 

How does the calculator determine the utility rate? 

The utility rate is either entered by the user, or is pulled directly from Energy Information Administration (EIA) reference data. If a user selects the utility we leverage EIA’s data to pull in the average price per kWh for electricity for that specific utility. 

We apply an escalation rate based on historical state averages. Based on EIA’s data on the average electricity rate increases we use that rate as the escalation rate. 

Escalation Rates (for Electricity Costs) 

Is there an escalation rate for the price of electricity? 

Yes, we apply an escalation to the utility rate. Our escalation rate is based on Energy Information Administration's (EIA) historical data on average state electricity price increases from 1990-2020. 

How can an appraiser use the calculator's results? 

The Equity Calculator shows the discounted cash flow — the dollar value of the energy the PV is projected to generate — from today through the end of the power production warranty period. This value is an important data point for the appraiser. 

However, the appraiser is unlikely to simply add this value to the appraisal. The appraiser is required to take into account the sales prices of comparable homes in the same market that have sold recently. If the appraiser sees that homes with PV are selling for more than similar homes without PV, they can use your Pearl Performance report as an additional tool to help determine how much value your PV system adds to your home. If PV is relatively new in your market and the appraiser cannot find comparable homes with PV that have sold recently, they can consider the Discounted Cash Flow amount shown in your Pearl Performance report as an alternative basis for assigning value to your PV system. 

The appraiser may also perform "tests of reasonableness"to determine how much value a system may add to a home. One approach is to look at the replacement value and/or the installation cost of the system. For example, if the discounted cash flow shows a value of $40,000 but the system was installed for $32,000, the appraiser will probably not add $40,000 to the home's value.